Harrison corporation is studying a project that would have an eight-year life and would require a $300,000 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:

Question

Dahlia Livingston

Business

10 February, 19:17

Harrison corporation is studying a project that would have an eight-year life and would require a $300,000 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:

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Nathalia Sandoval · Answer 1

The question is incomplete, the complete question is;

Harrison Corporation is studying a project that would have an eight-year life and would require a $300,000 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:

Sales $500,000

Less cash variable expenses 200,000

Contribution margin 300,000

Less fixed expenses:

Fixed cash expenses $150,000

Depreciation expenses 37,500 187,500

Net operating income $112,500

The company's required rate of return is 10%. The payback period for this project is closest to:

Answer:

The answer is 2 years.

This is how we calculate this;

Net operating income $112,500

Non cash deduction for depreciation 37,500

investment required = $3000,000

Annual net cash inflow $150,000

Payback period = Investment required : Annual net cash inflow

= $300,000 : $150,000 per year = 2 years