For Years 1-5, a proposed expenditure of $250,000 for a fixed asset with a 5-year life has expected net income of $40,000, $35,000, $25,000, $25,000, and $25,000, respectively, and net cash inflows of $90,000, $85,000, $75,000, $75,000, and $75,000, respectively. The cash payback period is 3 years.

Question

Quizplus · Accepted Answer

The cash payback period is calculated by summing the net cash inflows until the initial investment is recovered. By the end of Year 3, the cumulative cash inflow is $90,000 + $85,000 + $75,000 = $250,000, exactly matching the initial investment, thus confirming a 3-year cash payback period.

For Years 1-5, a Proposed Expenditure of $250,000 for a Fixed