The management of Lanzilotta Corporation is considering a project that would require an investment of $275,000 and would last for 6 years. The annual net operating income from the project would be $113,000, which includes depreciation of $18,000. The scrap value of the project's assets at the end of the project would be $17,500. The cash inflows occur evenly throughout the year. The payback period of the project is closest to (Ignore income taxes.): (Round your answer to 1 decimal place.)
| Given, | ||
| Initial Investment | 275000 | |
| Net Operating Income | 113000 | |
| Depreciation | 18000 | |
| Net annual cash flows = Net Operating Income + Depreciation | ||
| = 113000 + 18000 | ||
| = 131000 | ||
| Payback Period = Initial Investment / Net annual cash flows | ||
| = 275000 / 131000 | ||
| = 2.1 years | ||
The management of Lanzilotta Corporation is considering a project that would require an investment of $275,000...