Reference no: EM132972555

Quezon Company is evaluating two possible investments in depreciable plant assets. The company uses the straight-line method of depreciation. The following information is available:

                                                          Investment A                       Investment B

Initial capital investment             Php 56,250                          Php 80,000

Estimated useful life                      5 years                                  5 years

Estimated residual value                 Php 5,000                            Php 7,500

Estimated annual net cash inflow

For 3 years                                  Php 12,250                          Php 20,000

Required rate of return                        10%                                  12%

Problem 1: What is the payback period for Investment B?

Select one:

a. 1.82 years

b. 2.00 years

c. 5.34 years

d. 1.18 year