MC Qu. 41 (Ignore income taxes in this problem.)... (Ignore income taxes in this

Question

MC Qu. 41 (Ignore income taxes in this problem.)...

(Ignore income taxes in this problem.) The management of Helberg Corporation is considering a project that would require an investment of $260,000 and would last for 6 years. The annual net operating income from the project would be $110,000, which includes depreciation of $17,000. The scrap value of the project's assets at the end of the project would be $15,000. The cash inflows occur evenly throughout the year. The payback period of the project is closest to:

2.0 years

2.4 years

1.8 years

2.1 years

(Ignore income taxes in this problem.) The management of Helberg Corporation is considering a project that would require an investment of $260,000 and would last for 6 years. The annual net operating income from the project would be $110,000, which includes depreciation of $17,000. The scrap value of the project's assets at the end of the project would be $15,000. The cash inflows occur evenly throughout the year. The payback period of the project is closest to:

2.0 years

2.4 years

1.8 years

2.1 years

Explanation / Answer

The payback period of the project is closest to 2.4 Years

That is 260000/(110000-17000+15000) = 2.4

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