Caliber Lawnmowers Company is considering the purchase of a new machine costing $800,000.The company's management is estimating that the new machine will generate additional cash flows of $180,000 a year for ten years and have a salvage value of $50,000 at the end of ten years.What is the machine's payback period?

Question

Quizplus · Accepted Answer

The payback period is the amount of time it takes for an investment to generate enough cash flow to cover the initial investment. In this case, the initial investment is $800,000 and the annual cash flow is $180,000. So, the payback period is $800,000 / $180,000 = 4.44 years.

Caliber Lawnmowers Company Is Considering the Purchase of a New