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Harrison Corporation is studying a project that would have an eight-year life and would require a $400,000 investment in equipment which has no salvage value.

Harrison Corporation is studying a project that would have an eight-year life and would require a $400,000 investment in equipment which has no salvage value. The project would provide net operating income each year as follows for the life of the project:

Sales

$500,000

Less cash variable expenses

200,000

Contribution margin

300,000

Less fixed expenses:

Fixed cash expenses

$150,000

Depreciation expenses

37,500

187,500

Net operating income

$112,500

The company's required rate of return is 10%. The payback period for this project is closest to:

A.

3 years

B.

2 years

C.

2.5 years

D.

2.67 years

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