The Management of Sobus Corporation Is Considering a Project That

question 72

Essay

The management of Sobus Corporation is considering a project that would require an initial investment of $458,000 and would last for 9 years. The annual net operating income from the project would be $58,000, including depreciation of $48,000. At the end of the project, the scrap value of the project's assets would be $26,000.
Required:
Determine the payback period of the project. Show your work!

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Definitions:

Assets

Resources owned by a company from which future economic benefits are expected to flow to the company.

Deferred Expenses

Assets created when purchased in the past before being used to generate revenues; need to be adjusted at the end of the period to reflect the amount of expense incurred by using the assets over time.

Assets

Resources owned or controlled by a business, entity, or individual, which are expected to produce economic value or future benefits.