Question
Your firm is going to purchase a new piece of equipment. The equipment costs $4,520,000. The project will last 4 years. It will generate free
Your firm is going to purchase a new piece of equipment. The equipment costs $4,520,000. The project will last 4 years. It will generate free cash flows of $680,000 in year 1. The project will generate free cash flows of $915,000 in year 2. In the third year the project will generate free cash flows of $1,825,000. In the fourth year, the project will generate free cash flows of $2,560,000. The required rate of return on the project is 10.5% compounded annually. What is the Payback Period in years? Your answer should be accurate to two decimal places.
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