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Managerial Accounting

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After-Tax Cash Flows for Romano, Inc.

MGRACT-RXYXNY

Romano, Inc. plans to invest \$870,000 in new equipment. The equipment is expected to yield a cash inflow of \$400,000 before income tax each year for six years. Depreciation expense of \$148,000 is to be taken each year. The income tax rate is 40%.

Determine the payback period in years.