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The management of Lanzilotta Corporation is considering a project that would require an investment of $263,000 and would last for 8 years. The annual net operating income from the project would be $66,000, which includes depreciation of $31,000. 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 (Ignore income taxes.): Multiple Choice 3.8 years 2.6 years 2.7 years 4.0 years

Respuesta :

Answer:

2.7 years

Explanation:

The formula to compute the payback period is shown below:

= Initial investment ÷ Net cash flow

where,

Initial investment is $263,000

And, the net cash flow = annual net operating income + depreciation expenses

= $66,000 + $31,000

= $97,000

Now put these values to the above formula  

So, the value would equal to

= ($263,000) ÷ ($97,000)

= 2.71 years

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