Vandezande Inc. is considering the acquisition of a new machine that costs $370,000 and has a useful life of 5 years with no salvage value. The incremental net operating income and incremental net cash flows that would be produced by the machine are (Ignore income taxes.): Assume cash flows occur uniformly throughout a year except for the initial investment.
The payback period of this investment is closest to:

Question

Vandezande Inc. is considering the acquisition of a new machine that costs $370,000 and has a useful life of 5 years with no salvage value. The incremental net operating income and incremental net cash flows that would be produced by the machine are (Ignore income taxes.):  Assume cash flows occur uniformly throughout a year except for the initial investment.
The payback period of this investment is closest to:

Quizplus · Accepted Answer

11eacbfc_c61f_528a_8ffe_ef9917c50f19_TB7552_00 Year 3: $17,000 ÷ $123,000 = 0.1 (rounded)
Payback = 3.1 years