Question
Emilys Napkins and Accessories, Inc. is considering making an investment in a new production machine. The firm has estimated that the machine has a useful
Emilys Napkins and Accessories, Inc. is considering making an investment in a new production machine. The firm has estimated that the machine has a useful life of three years. At the end of the three years, you expect all of your investment to be worthless. The total investment required to open this enterprise is $12,000. Your aftertax cash flow is expected to be $3,000 per year and your required rate of return for this project is 12 percent. What is the Pay back Period in years? Potential answers: A) 2 B) 3 C) None of the answers provided is correct D) 1 E) 4 Hint: Answer C is not right answer
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