Question - The following details are provided by a manufacturing company:
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Product line
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Investment
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$1,190,000
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Useful life
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12 years
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Estimated annual net cash inflows for first year
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$400,000
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Estimated annual net cash inflows for second year
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$390,000
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Estimated annual net cash inflows for next ten years
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$490,000
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Residual value
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$90,000
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Depreciation method
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Straight-line
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Required rate of return
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12%
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Required - Calculate the payback period for the investment.
(a) 2.98 years
(b) 2.82 years
(c) 1.98 years
(d) 2.20 years