Question

The management of Lanzilotta Corporation is considering a project that would require an investment of $185,000 and would last for 6 years. The annual net operating income from the project would be $102,000, which includes depreciation of $19,000. The scrap value of the project's assets at the end of the project would be $25,300. The cash inflows occur evenly throughout the year. The payback period of the project is closest to (Ignore income taxes.): (Round your answer to 1 decimal place.) Noreen_5e_Rechecks_2019_10_16 Multiple Choice 1.5 years 1.8 years 1.3 years 2.7 years

Answer 1

Answer:

Payback period is 2.2 years.

Explanation:

Cash inflow = 102000-19000 = 83000

Payback period = Initial investment/Annual Cash inflow = 185000/83000 = 2.2 years