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Oriental Corporation has gathered the following data on a proposed investment project:
Investment in depreciable equipment $ 200,000
Annual net cash flows $ 50,000
Life of the equipment 10 years
Salvage value $ 0
Discount rate 10 %
The company uses straight-line depreciation on all equipment. Assume cash flows occur uniformly throughout a year except for the initial investment.
The payback period for the investment would be: Multiple Choice
a. 2.41 years
b. 0.25 years
c. 10 years
d. 4 years

Respuesta :

Answer:

d. 4 years

Explanation:

The formula to compute the payback period is shown below:

= Initial investment ÷ Net cash flow

where,  

Initial investment is $200,000

And, the net cash flow = $50,000

Now put these values to the above formula  

So, the value would equal to

= ($200,000) ÷ ($50,000)

= 4 years

All other information which is given is not relevant. Hence, ignored it

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