An initial investment of $180,000 is expected to generate $100,000 in annual cost savings over the asset's expected 3-year life.Assume straight-line depreciation and ignore income taxes.The payback period is _____.

Question

Quizplus · Accepted Answer

Payback period is the time required to recover the initial investment. 
Payback period = Initial investment / Annual savings = $180,000 / $100,000 = 1.8 years. 
Therefore, the answer is choice C.

An Initial Investment of $180,000 Is Expected to Generate $100,000