(L. OBJ. 2) Using the payback and accounting rate of return methods to make capital investment decisions [5—10 min]
Pace Hardware is adding a new product line that will require an investment of $1,512,000. Managers estimate that this investment will have a 10-year life and generate net cash inflows of $320,000 the first year $280,000 the second year, and $240,000 each year thereafter for eight years.
Requirement
1. Compute the payback period.
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