Question

Question 1) The following details are provided by a manufacturing company.

 

 

Product line

Investment

$1,100,000

Useful life

12 years

Estimated annual net cash inflows for first year

$385,000

Estimated annual net cash inflows for second year

$395,000

Estimated annual net cash inflows for next ten years

$300,000

Residual value

$50,000

Depreciation method

Straight-line

Required rate of return

12%

 

Calculate the payback period for the investment.

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