McDonald's Retail McDonald's Retail is considering an investment in a delivery truck.McDonald has found a used truck that he can purchase for $8,000.He estimates the truck would last six years and increase his store's net cash revenues by $2,000 per year.At the end of six years,the truck would have no salvage value and would be discarded.McDonald will depreciate the truck using the straight-line method.
Refer to McDonald's Retail.What is the payback period on the investment in the new truck?

Question

Quizplus · Accepted Answer

To calculate the payback period, we divide the initial investment ($8,000) by the annual net cash revenues ($2,000). The payback period is 4 years ($8,000 ÷ $2,000 = 4). Therefore, McDonald's Retail can recover its initial investment in the delivery truck in 4 years, making option C the best choice.

McDonald's Retail McDonald's Retail Is Considering an Investment in a Delivery