Question - Canadian Classics manufactures parts for classic automobiles. The CFO is considering the purchase of a two-ton press, which will allow the firm to stamp auto fenders. The equipment costs $250,000. The project is expected to produce after-tax cash flows of $80,000 per year. Liquidating the equipment will net the firm $10,000 in cash at the end of five years. The firm requires a 15% rate of return on all investments. The firm's tax rate is 38%. Ignore the effects of CCA.
What is the payback period for the proposed investment?