The management of Lanzilotta Corporation is considering a project that would require an investment of $218,000 and would last for 6 years. The annual net operating income from the project would be $106,000, which includes depreciation of $31,000. The scrap value of the project's assets at the end of the project would be $26,000. The cash inflows occur evenly throughout the year. The payback period of the project is closest to (Ignore income taxes.): (Round your answer to 1 decimal place.)

Question

Quizplus · Accepted Answer

The payback period is the amount of time it takes for the initial investment to be recovered from the net operating income. In this case, the initial investment is $218,000 and the annual net operating income is $106,000. Therefore, the payback period is $218,000 / $106,000 = 2.06 years. Rounding to one decimal place, the payback period is 2.1 years.

The Management of Lanzilotta Corporation Is Considering a Project That