Question: The Callaway Cattle Company is considering the construction of a
The Callaway Cattle Company is considering the construction of a new feed handling system for its feed lot in Abilene, Kansas. The new system will provide annual labor savings and reduced waste totaling $200,000, and the initial investment is only $500,000. Callaway’s management has used a simple payback method for evaluating new investments in the past but plans to calculate the discounted payback to analyze the investment. Where the appropriate discount rate for this type of project is 10 percent, what is the project’s discounted payback period?
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