Bill Plans to Open a Do-It-Yourself Dog Bathing Center in a Storefront

Multiple Choice

Bill plans to open a do-it-yourself dog bathing center in a storefront. The bathing equipment will cost $160,000. Bill expects the after-tax cash inflows to be $40,000 annually for seven years, after which he plans to scrap the equipment and retire to the beaches of Jamaica.

Assume the required return is 10%. What is the project's discounted payback period?

A) three years
B) four years
C) five years
D) six years
E) seven years