Bark Company is considering buying a machine for $240,000 with an estimated life of ten years and no salvage value. The straight-line method of depreciation will be used. The machine is expected to generate net income of $6,000 each year. The cash payback period on this investment is

Question

Quizplus · Accepted Answer

Cash payback period = Initial investment / Annual net income
Cash payback period = $240,000 / $6,000 per year
Cash payback period = 40 years / 5 = 8 years

Bark Company Is Considering Buying a Machine for $240,000 with an Estimated