A manufacturer plans to open a new plant. The new plant will cost $4,000,000 to build and make ready for production. Company management believes that the plant will produce a net profit of $100,000 in the first year and that profit will increase 5% per year until year 9 at which point profit will remain constant for the remainder of the plant's useful life. Determine the payback period for the plant. Do not consider the effect of interest. Express your answer in years to the nearest whole year.

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
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A manufacturer plans to open a new plant. The new plant will cost $4,000,000 to build and make
ready for production. Company management believes that the plant will produce a net profit of
$100,000 in the first year and that profit will increase 5% per year until year 9 at which point profit
will remain constant for the remainder of the plant's useful life. Determine the payback period for
the plant. Do not consider the effect of interest. Express your answer in years to the nearest whole
year.
Transcribed Image Text:A manufacturer plans to open a new plant. The new plant will cost $4,000,000 to build and make ready for production. Company management believes that the plant will produce a net profit of $100,000 in the first year and that profit will increase 5% per year until year 9 at which point profit will remain constant for the remainder of the plant's useful life. Determine the payback period for the plant. Do not consider the effect of interest. Express your answer in years to the nearest whole year.
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