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Henry Hardware is adding a new product line that will require an investment of $1,512,000. Managers estimate that this invest

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Answer #1

Computation of payback period of new product of Henry Hardware :

Payback period =

Initial investment ÷ Annual cash inflows

Initial Investment = $1512000

Annual cash inflows = $310000 + $270000 + ($240000×8)

= $2500000

5 years recovered = $ 1300000

Balance amount recovered = $212000 ÷ $240000

= 0.88 years.

Payback period = 5.88 years to take cover the initial investment.

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