Asked by Lilinoe Kekaula-VanGieson on Jul 11, 2024
Verified
(Ignore income taxes in this problem.)Ostermeyer Corporation is considering a project that would require an initial investment of $247,000 and would last for 7 years.The incremental annual revenues and expenses for each of the 7 years would be as follows: 
At the end of the project, the scrap value of the project's assets would be $16,000.
Required:
Determine the payback period of the project.Show your work!
Incremental Annual Revenues
The additional revenue generated from a specific action or decision, measured on an annual basis.
Scrap Value
The estimated resale value of an asset at the end of its useful life, typically associated with machinery, equipment, or vehicles.
Payback Period
The length of time required to recover the cost of an investment or project from its cash flows.
- Comprehend the importance of cash inflows and outflows in making financial decisions.
- Familiarize with the aspects crucial in decision-making for investments without factoring in income taxes.
Verified Answer
IJ
ibette jimenezJul 18, 2024
Final Answer : 
Payback period = Investment required ÷ Annual net cash inflow
= $247,000 ÷ $98,000 = 2.52 years
Payback period = Investment required ÷ Annual net cash inflow= $247,000 ÷ $98,000 = 2.52 years
Learning Objectives
- Comprehend the importance of cash inflows and outflows in making financial decisions.
- Familiarize with the aspects crucial in decision-making for investments without factoring in income taxes.