Rogers Company is studying a project that would have a ten-year life and would r

Question

Rogers Company is studying a project that would have a ten-year life and would require an $2,800,000 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:

250,000

160,000

760,000

$550,000

The company's required rate of return is 8%. What is the payback period for this project? (Round your answer to two decimal places.)

3.94 years

2.14 years

5.09 years

3.00 years

  Sales $1,560,000   Less cash variable expenses

250,000

  Contribution margin 1,310,000   Less fixed expenses:   Fixed cash expenses $600,000   Depreciation expenses

160,000

760,000

  Net operating income

$550,000

Explanation / Answer

the payback period for this project=$2,800,000 investment/cash inflows 550,000=5.09years

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