You have been asked to analyze a capital investment project for a new machine.The machine will cost $400,000, have an 8-year life and a salvage of $80,000.The new machine will generate annual net cash flows of $120,000.The payback period is:

Question

Quizplus · Accepted Answer

The payback period is calculated by dividing the initial investment by the annual net cash flows: $400,000 / $120,000 = 3.33 years.

You Have Been Asked to Analyze a Capital Investment Project