Davidson, Inc., is considering the purchase of production eq…
Davidson, Inc., is considering the purchase of production equipment that costs $300,000. The equipment is expected to generate an annual cash flow of $100,000 and have a useful life of five years with no salvage value. The firm’s cost of capital is 14%. The company uses the straight-line method of depreciation with no mid-year convention. Ignore income taxes. The payback period in years (round to two decimal places) for the project is