Buxton Corporation is evaluating a capital investment project which would requir

Question

Buxton Corporation is evaluating a capital investment project which would require an initial investment of $260,000 to purchase new machinery. The annual revenues and expenses generated specifically by this project each year during the project's nine year life would be $165,000 $41,000 $124,000 Sales Variable expenses Contribution margin Fixed expenses Salaries expense Rent expense Depreciation expense Total fixed expenses Operating income $30,000 $26,000 $21,000 $77,000 $47,000 OA. 5.5 ??. 2.1 O C. 10.0

Explanation / Answer

D. 3.8

The payback period of this potential project in years would be closest to:

= Investment / Annual cash flows

= $260,000 / ($47,000 + $21,000)

= 3.8 years

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