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.
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.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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 | |
| 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.
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