What is the payback period

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Q1. Holland Corp. is considering the purchase ofa new piece of equipment. The cost savings from the equipment would result in an annual increase in net income after tax of $272,000. The equipment will have an initial cost of $670,000 and have a 5-year life. If there is no salvage value of the equipment, what is the payback period?

Q2. ThreeRivers Corp. is considering the purchase of a new piece of equipment with a life of 11 years. The internal rate of return of the project is 14%. ThreeRivers has a required rate of return (hurdle rate) of 10%. The project would have:

a net present value of zero.

a payback period more than 11 years.

an accounting rate of return greater than 10%.

a net present value greater than zero.

Reference no: EM132613298

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