Fast Food, Inc., has purchased a new donut maker. It cost $16,000 and has an estimated life of 10 years. The following annual donut sales and expenses are projected (Ignore income taxes.): Assume cash flows occur uniformly throughout a year except for the initial investment.
The payback period on the new machine is closest to:

Question

Fast Food, Inc., has purchased a new donut maker. It cost $16,000 and has an estimated life of 10 years. The following annual donut sales and expenses are projected (Ignore income taxes.):  Assume cash flows occur uniformly throughout a year except for the initial investment.
The payback period on the new machine is closest to:

Quizplus · Accepted Answer

11eacbfc_c621_0047_8ffe_27616669d8da_TB7552_00 Payback period = Investment required ÷ Annual net cash inflow
= $16,000 ÷ $6,000 per year = 2.7 years (rounded)