Jarvey Corporation is studying a project that would have a ten-year life and would require a $450,000 investment in equipment which has no salvage value. The project would provide net operating income each year as follows for the life of the project (Ignore income taxes.): The company's required rate of return is 12%. The payback period for this project is closest to:

Question

Jarvey Corporation is studying a project that would have a ten-year life and would require a $450,000 investment in equipment which has no salvage value. The project would provide net operating income each year as follows for the life of the project (Ignore income taxes.):  The company's required rate of return is 12%. The payback period for this project is closest to:

Quizplus · Accepted Answer

11eacbfc_c614_a3e9_8ffe_75b069f31ccb_TB7552_00 Payback period = Investment required ÷ Annual net cash inflow
= $450,000 ÷ $150,000 per year = 3 years

Jarvey Corporation Is Studying a Project That Would Have a Ten-Year