(Ignore income taxes in this problem.) Czaplinski Corporation is considering a p

Question

(Ignore income taxes in this problem.) Czaplinski Corporation is considering a project that would require an investment of $673,000 and would last for 6 years. The incremental annual revenues and expenses generated by the project during those 6 years would be as follows:

25,500  

165,500  

71,000  

113,500  

$52,000  

The scrap value of the project's assets at the end of the project would be $36,000. The payback period of the project is closest to:

  Sales $191,000     Variable expenses

25,500  

  Contribution margin

165,500  

  Fixed expenses:      Salaries 24,500        Rents 18,000        Depreciation

71,000  

  Total fixed expenses

113,500  

  Net operating income

$52,000  

Explanation / Answer

B

Payback period

= Investment required

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