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As the head of Human Resources at Calamai Robots & Tea Corporation, Aishwarya Patel is determined to increase the wealth of the company.

As the head of Human Resources at Calamai Robots & Tea Corporation, Aishwarya Patel is determined to increase the wealth of the company. She was approached by McGowan Executive Management Retreats, Inc—a company specializing in executive training. McGowan is offering, for an upfront payment of $75,000, to design a five-year executive retreat program for Calamai’s 15 managers. Once the program is designed, the company’s 15 managers will be scheduled to fly to a retreat in Bermuda to acquire expert knowledge in tea productivity. It is expected that the program will improve the company’s tea revenues by 1%, or $500,000, each year for five years. However, with all this focus on expanding the tea revenues, Aishwarya expects robot sales to decline by 0.75%, or $175,000, each year. After five years, the acquired knowledge would be obsolete and the revenues for the two product lines would return to previous levels. Aishwarya also believes that a retreat of this nature would reduce Calamai’s manager turnover by 1 manager each year. When a manager does not turnover, Aishwarya does not have to run ads at a cost of $4,500 each instance. The cost of flying each manager to the retreat is expected to be $1,500 round trip. Lodging, meals, and incidental expenses are expected to cost $600 per manager per day for the seven day retreat. The company has a tax rate is 31%. Its depreciation method is straight-line. The company paid a dividend to shareholders of $1 per share and is expect to do the same over the next five years. Variable costs for the tea division and robot division are 65% and 30% of sales revenue, respectively. What is the payback for this project cash flows?
A. 2.73
B. 2.82
C. 3.05
D. 3.21
E. 3.26
F. 4.08
G. 5.2
H. does not payback

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