Olinick Corporation is considering a project that would require an investment of $343,000 and would last for 8 years. The incremental annual revenues and expenses generated by the project during those 8 years would be as follows (Ignore income taxes.): The scrap value of the project's assets at the end of the project would be $23,000. The cash inflows occur evenly throughout the year. The payback period of the project is closest to:

Question

Olinick Corporation is considering a project that would require an investment of $343,000 and would last for 8 years. The incremental annual revenues and expenses generated by the project during those 8 years would be as follows (Ignore income taxes.):  The scrap value of the project's assets at the end of the project would be $23,000. The cash inflows occur evenly throughout the year. The payback period of the project is closest to:

Quizplus · Accepted Answer

11eacbfc_c614_f20b_8ffe_0f8ad68f64e8_TB7552_00 Payback period = Investment required ÷ Annual net cash inflow
= $343,000 ÷ $107,000 per year = 3.2 years

Olinick Corporation Is Considering a Project That Would Require an Investment