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11 November, 18:02

The management of Truelove Corporation is considering a project that would require an initial investment of $359,020 and would last for 7 years. The annual net operating income from the project would be $29,900, including depreciation of $47,160. At the end of the project, the scrap value of the project's assets would be $28,900. (Ignore income taxes.) Determine the payback period of the project.

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  1. 11 November, 18:13
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    4.66 years

    Explanation:

    he formula to compute the payback period is shown below:

    = Initial investment : Net cash flow

    where,

    Initial investment is $359,020

    And, the net cash flow = annual net operating income + depreciation expenses

    = $29,900 + $47,160

    = $77,060

    Now put these values to the above formula

    So, the value would equal to

    = ($359,020) : ($77,060)

    = 4.66 years

    All other information which is given is not relevant. Hence, ignored it
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