Arrendo,Inc Calculate the Payback Period for Investment B

question 73

Multiple Choice

Arrendo,Inc.is evaluating two possible investments in depreciable plant assets.The company uses the straight-line method of depreciation.The following information is available: $$\begin{array} { | l | r | r | } \hline & \text { Investment A } & \text { Investment B } \\\hline \text { Initial capital investment } & \$ 107,000 & \$ 159,000 \\\hline \text { Estimated useful life } & 10 \text { years } & 10 \text { years } \\\hline \text { Estimated residual value } & 0 & \$ 26,000 \\\hline \text { Estimated annual net cash inflow for 10 years } & \$ 28,000 & \$ 46,000 \\\hline \text { Required rate of return } & 10 \% & 14 \% \\\hline\end{array}$$ Calculate the payback period for Investment B.(Round your answer to two decimal places.)

• A) 3.46 years
• B) 1.94 years
• C) 2.89 years
• D) 3.82 years

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Definitions:

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Boundary Overlaps

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Phenomenon

An observable event or fact, especially one that is unusual, important, or otherwise notable.