Chapter 14, Problem 14F15

To determine

Payback period:

It refers to the time length that is needed in order to recover the investment cost. The project that have long payback period should not be undertaken by the company. This is an important determinant which tells the company whether to undertake the project or not. It is computed by the following formula:

  $\text{Pay-back period}=\frac{\text{Initial }\text{Investment}}{\text{cash flows}}$

Payback period when variable expenses changed to 45%.