Te project would provide net operating income each year

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Harrison Company 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

 

187,500

Less cash variable expenses

 

$112,500

Contribution margin

 

187,500

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%. What is the payback period for this project?

A) 3 years

B) 2 years

C) 2.5 years

D) 2.67 years

Reference no: EM13567132

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