Question

palmer corp is considering the purchase of new equipment the cost savings from the equipment would result in the annual increase income after tax of 133500 the equipment will have an initial cost of 534000 and have a 7 year life is the salvage value estimated to be 9000 what is estimated to be the payback period

Answer 1

Payback period= 4 years

Step-by-step explanation:

The payback period is the estimated length of time in years it takes

the net cash inflow from a project to equate the net cash the initial cost.

Where a project is expected to generate a series of equal annual net cash inflow, the payback period can be calculated as:

The initial invest /Net cash inflow per year

So the payback period for project X

= $534,000/133,500

= 4 years

Payback period= 4 years