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25 September, 14:26

The management of Lanzilotta Corporation is considering a project that would require an investment of $228,000 and would last for 6 years. The annual net operating income from the project would be $108,000, which includes depreciation of $29,000. The scrap value of the project's assets at the end of the project would be $15,000. 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.)

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  1. 25 September, 16:13
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    Answer:The investment cost is $280,000

    The expected useful life of the investment is 66 years

    The annual net operating income is $114,000

    The annual depreciation expense is 31,000

    The annual cash inflows for this project will include net operating income and depreciation expense (non-cash item) is $145,000 ($114,000 + $31,000)

    The payback period formula is used to calculate the period

    Payback Period = Investment Cost / net cash inflow per year

    =$280,000 / $145,000

    = 1.93 years
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