A company is considering of purchasing a new machine

Subject:FinancePrice:2.86 Bought15

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A company is considering of purchasing a new machine. The estimated cost of the machine is Php 300,000. The machine is not expected to have a residual value at the end of four years. The machine is expected to generate annual cash inflows for the next four years as follows:

Year 1 ----- Php 150,000.00

Year 2 ----- Php 120,000.00

Year 3 ----- Php 90,000.00

Year 4 ----- Php 50,000.00

This company has a policy of accepting project only if it has a payback period of not longer than 3 years. What is the expected payback period for this project?

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3 points for solution

2 points for correct choice

Select one:

a. 3.6

b. 3

c. 2.33

d. 2.93