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Problem - A company is evaluating three possible investments. The following information is provided by the company:

 

Project A

Project B

Project C

Investment

$200,000

$54,000

$200,000

Residual value

0

20,000

24,000

Net cash flows

 

 

 

Year 1

52,000

36,000

94,000

Year 2

52,000

27,000

64,000

Year 3

52,000

23,000

74,000

Year 4

52,000

20,000

34,000

Year 5

52,000

0

0

What is the payback period for Project A? (Assume that the company uses the straight-line depreciation method.)

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