A company is considering purchasing a machine for $21,000. The machine will generate operating income of $2,000; annual net cash inflows from the machine will be $3,500. The cash payback period for the new machine is 6 years.

Question

Quizplus · Accepted Answer

The cash payback period is calculated by dividing the initial investment by the annual net cash inflows. In this case, the cash payback period is $21,000 / $3,500 = 6 years.

A Company Is Considering Purchasing a Machine for $21,000