If a proposed expenditure of $80,000 for a fixed asset with a 4-year life has an annual expected net cash inflow and net income of $32,000 and $12,000, respectively, the cash payback period is 4 years.

Question

Quizplus · Accepted Answer

The cash payback period is calculated based on the annual expected net cash inflow, not net income. With an annual expected net cash inflow of $32,000, the cash payback period for the $80,000 expenditure would be $80,000 / $32,000 = 2.5 years.

If a Proposed Expenditure of $80,000 for a Fixed Asset