The management of Truelove Corporation is considering a project that would require an initial investment of $359,020 and would last for 7 years. The annual net operating income from the project would be $29,900, including depreciation of $47,160. At the end of the project, the scrap value of the project's assets would be $28,900. (Ignore income taxes.) Determine the payback period of the project.

Question

Business

Manuel Brock

17 July, 01:01

The management of Truelove Corporation is considering a project that would require an initial investment of $359,020 and would last for 7 years. The annual net operating income from the project would be $29,900, including depreciation of $47,160. At the end of the project, the scrap value of the project's assets would be $28,900. (Ignore income taxes.) Determine the payback period of the project.

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Heather Downs · Answer 1

4.66 years

Explanation:

he formula to compute the payback period is shown below:

= Initial investment : Net cash flow

where,

Initial investment is $359,020

And, the net cash flow = annual net operating income + depreciation expenses

= $29,900 + $47,160

= $77,060

Now put these values to the above formula

So, the value would equal to

= ($359,020) : ($77,060)

= 4.66 years

All other information which is given is not relevant. Hence, ignored it