A Company Is Evaluating Three Possible Investments What Is the Payback Period for Project A? (Assume That

question 74

Multiple Choice

A company is evaluating three possible investments.The following information is provided by the company: $$\begin{array} { | l | r | r | r | } \hline & \text { Project A } & \text { Project B } & \text { Project C } \\\hline \text { Investment } & \$ 240,000 & \$ 54,000 & \$ 240,000 \\\hline \text { Residual value } & 0 & 18,000 & 38,000 \\\hline \text { Net cash inflows: } & & & \\\hline \text { Year 1 } & 62,000 & 34,000 & 98,000 \\\hline \text { Year 2 } & 62,000 & 25,000 & 68,000 \\\hline \text { Year 3 } & 62,000 & 21,000 & 78,000 \\\hline \text { Year 4 } & 62,000 & 18,000 & 38,000 \\\hline \text { Year 5 } & 62,000 & 0 & 0 \\\hline\end{array}$$ What is the payback period for Project A? (Assume that the company uses the straight-line depreciation method.) (Round your answer to two decimal places.)

• A)2.87 years
• B)1.59 years
• C)3.87 years
• D)5.00 years

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