(Ignore income taxes in this problem. ) Jarvey Company 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%.What is the payback period for this project?

Question

(Ignore income taxes in this problem. ) Jarvey Company 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%.What is the payback period for this project?

Quizplus · Accepted Answer

The payback period is the investment cost of $450,000 divided by the $150,000 ($105,000 + $45,000) annual cash flow;$450,000 F1F1F1S1F1F1F10 $150,000 = 3 years.

(Ignore Income Taxes in This Problem