1 answer

The management of Truelove Corporation is considering a project that would require an initial investment of...

Question:

The management of Truelove Corporation is considering a project that would require an initial investment of $336,990 and woul
The management of Truelove Corporation is considering a project that would require an initial investment of $336,990 and would last for 7 years. The annual net operating income from the project would be $28.800, including depreciation of $44.170. At the end of the project, the scrap value of the project's assets would be $27,800. (Ignore income taxes.) Required: Determine the payback period of the project. (Round your answer to 2 decimal places.) Payback period < Prey 8 of 14 Next >

Answers

Step-1, Calculation of the annual cash flow

The annual cash flow = Annual net operating income + Depreciation expenses

= $28,800 + $44,170

= $72,970 per year

Step-2, The Payback period of the Project

The Payback period of the Project = Initial Investment Cost / Annual cash flow

= $336,990 / $72,970 per year

= 4.62 Years

“Hence, the Payback period of the Project will be 4.62 Years”

.

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