Dragonfly, Inc Calculate the Payback Period for Investment A

question 65

Multiple Choice

Dragonfly, Inc. is evaluating two possible investments in depreciable plant assets. The company uses the straight-line method of depreciation. The following information is available: $$\begin{array} { | l | r | r | } \hline & \text { Investment A } & \text { Investment B } \\\hline \text { Initial capital investment } & \$ 101,000 & \$ 151,000 \\\hline \text { Estimated useful life } & 10 \text { years } & 10 \text { years } \\\hline \text { Estimated residual value } & 0 & \$ 20,000 \\\hline \text { Estimated annual net cash inflow for 10 years } & \$ 28,000 & \$ 47,000 \\\hline \text { Required rate of return } & 12 \% & 12 \% \\\hline\end{array}$$ Calculate the payback period for Investment A. (Round your answer to two decimal places.)

• A) 2.22 years
• B) 2.89 years
• C) 1.00 year
• D) 3.61 years

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