After preparing a preliminary version of its financial statements, a company found that it made a mistake in computing straight-line depreciation on the books. The company needed to reduce Depreciation Expense on its books by $100,000. What would be increased by this change?

d. 5 years

Explanation:

* Assuming Simple payback has been asked in the question rather discounted.

Initial Cost = $2,000,000

Cash inflows = $400,000 per year

Interest rate = 12%

Payback = Initial cost / Cash inflow

Payback = $2,000,000 / $400,000 per year

Payback = $2,0 / $4 per year

Payback = 5 years

So, the payback period of this equipment is 5 years.