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Assume that you are thinking about starting your own small business. You have made the...

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Accounting

Assume that you are thinking about starting your own small business. You have made the following estimates regarding this opportunity:

  • You can rent a location for your business at a cost of $36,000 per year.
  • The equipment costs incurred to start the business would total $250,000. The equipment would have a 5-year useful life and a salvage value of $25,000.
  • Your companys estimated sales per year would equal $350,000 and its variable cost of goods sold would be 30% of sales.
  • Other operating costs would include $63,000 per year in salaries, $4,000 per year for insurance, $25,000 per year for utilities, and a 3% sales commission.

The payback period for this investment opportunity is closest to:

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