(Ignore income taxes in this problem.) Purvell Corporation has just acquired a new machine with the following characteristics:
The company uses straight-line depreciation and a $5,000 salvage value. Assume cash flows occur uniformly throughout a year except for the initial investment and the salvage at the end of the project.
-The payback period is closest to:

Question

(Ignore income taxes in this problem.) Purvell Corporation has just acquired a new machine with the following characteristics:
  The company uses straight-line depreciation and a $5,000 salvage value. Assume cash flows occur uniformly throughout a year except for the initial investment and the salvage at the end of the project.
-The payback period is closest to:

Quizplus · Accepted Answer

Payback period = Investment required ÷ Annual net cash inflow
= $50,000 ÷ $15,000 per year = 3.33 years (rounded)

(Ignore Income Taxes in This Problem