Question

The management of Truelove Corporation is considering a project that would require an initial investment of $349,000 and would last for 7 years. The annual net operating income from the project would be $29,400, including depreciation of $45,800. At the end of the project, the scrap value of the project's assets would be $28,400. (Ignore income taxes.) Required: Determine the payback period of the project. (Round your answer to 2 decimal places.)

Answer 1

4.64 years

Step-by-step explanation:

The computation of the payback period is given below;

We know that

Payback period = Investment required ÷ Net annual cash inflow

where,

Net annual cash inflow is

= $29,400 + $45,800

= $75,200

Now the Payback period is

= $349,000 ÷ $75,200

= 4.64 years

hence, the payback period of the project is 4.64 years