Question - The Keego Company is planning a $200,000 equipment investment which has an estimated five-year life with no estimated salvage value. The company has projected the following annual cash flows for the investment.
year cash flows
1 $120,000
2 $60,000
3 $40,000
4 $40,000
5 $40,000
total $300,000
Assuming that the cash inflows occur evenly over the year, the payback period for the investment is:
a. 0.75 years
b. 1.67 years
c. 4.91 years
d. 2.50 years