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Jarvey Corp. is studying a project that would have a ten-year life and would require a $450,000.00 investment in equipment which has no salvage value.

Jarvey Corp. is studying a project that would have a ten-year life and would require a $450,000.00 investment in equipment which has no salvage value. The project would provide net operating income of each year as follows for the life of the project (ignore income taxes.)

Sales: $500,000

Less Cash Variable Expenses: $200,000

Contribution Margin: $300,000

Less Fixed Expenses

Fixed cash expenses: $150,000

Depreciation expenses: $45,000

Net Operating Income: $105,000

The company's required rate of return is 12% What is the payback period?

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