Ostermeyer Corporation is considering a project that would require an initial investment of $307,000 and would last for 8 years. The incremental annual revenues and expenses for each of the 8 years would be as follows (Ignore income taxes.):

Sales		$ 213,000
Variable expenses		52,000
Contribution margin		161,000
Fixed expenses:
Salaries	$ 25,000
Rents	35,000
Depreciation	34,500
Total fixed expenses		94,500
Net operating income		$ 66,500

At the end of the project, the scrap value of the project's assets would be $17,500.

Required:

Determine the payback period of the project.

Note: Round your answer to 2 decimal places.

Answer rating: 100% (QA)

To determine the payback period of the project we need to calculate how long it takes for the initia... View the full answer