Assume that you are thinking about starting your own small business. You have made the...
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Accounting
Assume that you are thinking about starting your own small business. You have made the following estimates regarding this opportunity:
You can rent a location for your business at a cost of $36,000 per year.
The equipment costs incurred to start the business would total $250,000. The equipment would have a 5 -year useful life and a salvage value of $25,000.
Your company's estimated sales per year would equal $350,000 and its variable cost of goods sold would be 30% of sales.
Other operating costs would include $59,000 per year in salaries, $4,000 per year for insurance, $25,000 per year for utilities, and a 3% sales commission.
The payback period for this investment opportunity is closest to:
a: 4.17
b: 2.26
c: 3.86
d: 3.17
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