Question

Heather Company is considering the acquisition of a machine that costs $360,000. The machine is expected to have a useful life of 6 years, a negligible residual value, an annual cash flow of $120,000, and annual operating income of $83,721.

What is the estimated cash payback period for the machine?A. 5 yearsB. 2.5 yearsC. 4.3 yearsD. 3 years

Answer 1

3 years

Step-by-step explanation:

The cash payback period measures how long it takes for the amount invested in a project to be recouped from cumulative cash flows.

Explanations on how the payback period is calculated can be found in the attached image.

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