Heidi Company is considering the acquisition of a machine that costs $420,000. The machine is expected to have a useful life of six years, a negligible residual value, an annual net cash flow of $120,000, and annual operating income of $83,721. What is the estimated cash payback period for the machine?

Question

Quizplus · Accepted Answer

The cash payback period is calculated by dividing the initial investment by the annual net cash flow. Thus, $420,000 / $120,000 = 3.5 years.

Heidi Company Is Considering the Acquisition of a Machine That