Guerdon Ltd Is Reviewing a Project That Has an Initial

Multiple Choice

Guerdon Ltd is reviewing a project that has an initial outlay of $3m. The project will generate a cash inflow of $2m per annum. The project is expected to have a useful life of six years and a zero salvage value. This company uses straight-line depreciation. What is the payback period?

A) 0.67 years
B) 1.5 years
C) 2.0 years
D) 6 years