What is the approximate payback period

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Reference no: EM131992656

Michigan Mattress Company is considering the purchase of land and the construction of a new plant. The land, which would be bought immediately (at t = 0), has a cost of $200,000 and the building, which would be erected at the end of the first year (t = 1), would cost $800,000. It is estimated that the firm's after-tax cash flow will be increased by $150,000 starting at the end of the second year, and that this incremental inflow would increase at a 10 percent rate annually over the next 10 years. What is the approximate payback period?

Reference no: EM131992656

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