Jordan Company is considering the purchase of a machine with the following data: $$\begin{array} { l r }
\text { Initial cost } & \$ 150,000 \
\text { One-time training cost } & 12,000 \
\text { Annual maintenance costs } & 15,000 \
\text { Annual cost savings } & 75,000 \
\text { Salvage value } & 20,000
\end{array}$$ The cash payback period is

Question

Jordan Company is considering the purchase of a machine with the following data: $$\begin{array} { l r } 
\text { Initial cost } & \$ 150,000 \
\text { One-time training cost } & 12,000 \
\text { Annual maintenance costs } & 15,000 \
\text { Annual cost savings } & 75,000 \
\text { Salvage value } & 20,000
\end{array}$$ The cash payback period is

Quizplus · Accepted Answer

The cash payback period is the number of years it takes for the cumulative cash inflows to equal the initial investment. In this case, the initial investment is $150,000 + $12,000 = $162,000. The annual cash inflows are $75,000 - $15,000 = $60,000. Therefore, the cash payback period is $162,000 / $60,000 = 2.70 years.

Jordan Company Is Considering the Purchase of a Machine with the Following