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Pillows Incorporated was considering an investment in the following project: Required initial investment $ 860,000 Net annual after-tax cash inflow $ 160,000 Annual depreciation expense
Pillows Incorporated was considering an investment in the following project:
Required initial investment | $ 860,000 |
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Net annual after-tax cash inflow | $ 160,000 |
Annual depreciation expense (($860,000 $161,000)/15 years) | $ 46,600 |
Estimated salvage value | $ 161,000 |
Life of the project in years | 15 |
Assume that cash inflows occur evenly throughout the year. The estimated payback period in years (rounded to one decimal place) for the proposed project is:
Multiple Choice
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3.1 years.
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4.0 years.
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5.2 years.
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5.4 years.
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7.3 years.
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