Asked by Teigan Catlin on Jun 22, 2024
Verified
The management of Truelove Corporation is considering a project that would require an initial investment of $321,000 and would last for 7 years. The annual net operating income from the project would be $28,000, including depreciation of $42,000. At the end of the project, the scrap value of the project's assets would be $27,000. (Ignore income taxes.)Required:Determine the payback period of the project.
Payback Period
The length of time required to recover the cost of an investment or to reach the break-even point.
Initial Investment
The initial amount of money spent to start a project, purchase assets, or acquire a stake in a business venture.
Net Operating Income
A financial metric that calculates the profitability of a business's core operations, excluding the costs and returns of financial activities and one-time events.
- Acquire the ability to assess and figure out the payback duration for an investment.
- Predict future cash receipts and disbursements linked to investment initiatives.
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Learning Objectives
- Acquire the ability to assess and figure out the payback duration for an investment.
- Predict future cash receipts and disbursements linked to investment initiatives.
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