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20 March, 06:39

Harvey Corporation is studying a project that would have a ten-year life and would require a $450,000 investment in equipment which has no salvage value. The project would provide net operating income each year as follows for the life of the project (Ignore income taxes.) :

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  1. 20 March, 06:41
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    3 years

    Explanation:

    The formula to compute the payback period is shown below:

    = Initial investment : Net cash flow

    where,

    Initial investment is $450,000

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

    = $105,000 + $45,000

    = $150,000

    Now put these values to the above formula

    So, the value would equal to

    = ($450,000) : ($150,000)

    = 3 years
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