If a proposed expenditure of $70,000 for a fixed asset with a four-year life has an annual expected net cash flow and net income of $32,000 and $12,000, respectively, the cash payback period is 2.5 years.

Question

Quizplus · Accepted Answer

The cash payback period is calculated by dividing the initial investment by the annual cash inflow. In this case, $70,000 / $32,000 = 2.1875 years, not 2.5 years.

If a Proposed Expenditure of $70,000 for a Fixed Asset