Author Question: Michigan Mattress Company is considering the purchase of land and the construction of a new plant. ... (Read 24 times)

imanialler · **on:** Apr 25, 2021

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 $100,000 and the building, which would be erected at the end of the first year (t = 1), would cost $500,000. It is estimated that the firm's after-tax cash flow will increase by $100,000 starting at the end of the second year, and that this incremental flow would increase at a 10 percent rate annually over the next 10 years. What is the approximate payback period?
◦ 2 years
◦ 4 years
◦ 6 years
◦ 8 years
◦ 10 years

Harbringer · **Reply #1 on:** Apr 25, 2021

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