A school administrator plans to revive the old school auditorium by installing new

furniture and fixtures. The refurbishing would cost a total of Php$250,000.$ It will have a

useful life of $7$ years and a salvage value of Php$10,000.$ Annual profits for this project will

be $Php50,000.$ Moreover, the auditorium can be rented out for external clients at a rate of

Php$500$ per hour for additional revenue. It is projected that the auditorium will be rented

for $100$ hours per year, uniformly distributed throughout the year.

How many years will it take the school to recover the investment using simple payback?

$2$ years

$1\mathrm{.}5$ years

$3\mathrm{.}5$ years

$1$ year

$2\mathrm{.}5$ years SHOW SOLUTION