Rent-to-Own Equipment Co. is considering a new inventory system that costs $450,000. The system is expected to generate positive cash flows over the next four years in the amounts of $250,000 in year one, $125,000 in year two, $110,000 in year three, and $80,000 in year four. Rent-to-Own's required rate of return is 10%. What is the payback period of this project? a. 4.00 years b. 3.02 years c. 2.68 years d. 2.42 years

Principles of Accounting Volume 2
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ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax
Chapter11: Capital Budgeting Decisions
Section: Chapter Questions
Problem 5EB: A grocery store is considering the purchase of a new refrigeration unit with an Initial Investment...
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Rent-to-Own Equipment Co. is considering a new
inventory system that costs $450,000. The
system is expected to generate positive cash
flows over the next four years in the amounts of
$250,000 in year one, $125,000 in year two,
$110,000 in year three, and $80,000 in year four.
Rent-to-Own's required rate of return is 10%.
What is the payback period of this project?
a. 4.00 years
b. 3.02 years
c. 2.68 years
d. 2.42 years
Transcribed Image Text:Rent-to-Own Equipment Co. is considering a new inventory system that costs $450,000. The system is expected to generate positive cash flows over the next four years in the amounts of $250,000 in year one, $125,000 in year two, $110,000 in year three, and $80,000 in year four. Rent-to-Own's required rate of return is 10%. What is the payback period of this project? a. 4.00 years b. 3.02 years c. 2.68 years d. 2.42 years
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