(Ignore income taxes in this problem.) Neighbors Corporation is considering a pr

Question

(Ignore income taxes in this problem.) Neighbors Corporation is considering a project that would require an investment of $369,000 and would last for 8 years. The incremental annual revenues and expenses generated by the project during those 8 years would be as follows:

The scrap value of the project's assets at the end of the project would be $33,000. The cash inflows occur evenly throughout the year. The payback period of the project is closest to:

2.8 years

4.6 years

3.5 years

2.7 years

(Ignore income taxes in this problem.) Neighbors Corporation is considering a project that would require an investment of $369,000 and would last for 8 years. The incremental annual revenues and expenses generated by the project during those 8 years would be as follows:

Explanation / Answer

When cash flows are equal Payback period= Investment required for the Project/net cash Flow

=$369000/$131000= 2.82 closest to 2.8 years

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