(Ignore income taxes in this problem.) Limon Corporation is considering a projec

Question

(Ignore income taxes in this problem.) Limon Corporation is considering a project that would require an initial investment of $219,000 and would last for 6 years. The incremental annual revenues and expenses for each of the 6 years would be as follows:

At the end of the project, the scrap value of the project's assets would be $13,150.

Determine the payback period of the project

(Ignore income taxes in this problem.) Limon Corporation is considering a project that would require an initial investment of $219,000 and would last for 6 years. The incremental annual revenues and expenses for each of the 6 years would be as follows:

Explanation / Answer

Hi,

Please find the detailed answer as follows:

Payback period is the period within which the initial investment is recovered by the company.

Payback Period = Initial Investment/Annual Cash Inflows

Annual Cash Inflows = Net Income + Depreciation = 102200 + 38000 = 140200

Payback Period = 219000/140200 = 1.56 Years

Answer is 1.56 Years.

Thanks.

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