An investment project is expected to yield $12,000 in annual revenues, has $3,000 in fixed costs per year, and requires an initial investment of $6,000 . Given a cost of goods sold of 50 percent of sales, what is the payback period in years?
a. 1.00
b. 1.50
c. 2.00
d. 4.00
C
Net cash flow = $12,000 - $6,000 - $3,000
Net cash flow = $3,000
$6,000/$3,000 = 2 years
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