The Following Details Are Provided by a Manufacturing Company Calculate the Payback Period for the Investment

question 90

Multiple Choice

The following details are provided by a manufacturing company: $$\begin{array} { | l | r | } \hline & \text { Product line } \\\hline \text { Investment } & \$ 1,100,000 \\\hline \text { Useful life } & 12 \text { years } \\\hline \text { Estimated annual net cash inflows for first year } & \$ 400,000 \\\hline \text { Estimated annual net cash inflows for second year } & \$ 390,000 \\\hline \text { Estimated annual net cash inflows for next ten years } & \$ 380,000 \\\hline \text { Residual value } & \$ 70,000 \\\hline \text { Depreciation method } & \text { Straight-line } \\\hline \text { Required rate of return } & 14 \% \\\hline\end{array}$$ Calculate the payback period for the investment.(Round your answer to two decimal places.)

• A) 2.75 years
• B) 2.82 years
• C) 2.55 years
• D) 2.77 years

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