Question
Neighbors Corporation is considering a project that would require an investment of $354,000 and would last for 8 years. The incremental annual revenues and expenses
Neighbors Corporation is considering a project that would require an investment of $354,000 and would last for 8 years. The incremental annual revenues and expenses generated by the project during those 8 years would be as follows: Sales $210,000 Variable expenses 22,000 Contribution margin 188,000 Fixed expenses: Salaries 40,000 Rents 53,000 Depreciation 48,000 Total fixed expenses 141,000 Net operating income $47,000 The scrap value of the project's assets at the end of the project would be $30,000. The cash inflows occur evenly throughout the year. The payback period of the project is closest to:
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