Blender Inc. purchased a new piece of equipment that cost $120,000. The equipment included an investment in working capital of $19,000. The equipment is will be used for 10 years and will have a salvage value of $10,000. The annual operating cash inflows will be $45,000, and the annual operating cash outflows will be $30,000. The tax rate is 21%, and the company requires an after-tax rate of return of 8%. Calculate the simple payback period of the equipment.

Question

Quizplus · Accepted Answer

($120,000 + $19,000) ÷ ($45,000 - $30,000) = 9.3 years
(cost + work cap.) ÷ (cash in - cash out)