(Ignore income taxes in this problem.)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:
The company's required rate of return is 12%.The payback period for this project is closest to:

Question

(Ignore income taxes in this problem.)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:
 The company's required rate of return is 12%.The payback period for this project is closest to:

Quizplus · Accepted Answer

11ea7761_15b2_e500_81a5_afa7f1ec6577_TB2580_00 Payback period = Investment required ÷ Annual net cash inflow
= $450,000 ÷ $150,000 per year = 3 years

(Ignore Income Taxes in This Problem