Caliber Company is considering the purchase of a new machine costing $800,000. The company's management is estimating that the new machine will generate additional cash flows of $180,000 a year for ten years and have a salvage value of $50,000 at the end of ten years. What is the machine's payback period?

Question

Quizplus · Accepted Answer

The payback period is calculated by dividing the initial investment by the annual cash inflow. $800,000 / $180,000 = 4.44 years.

Caliber Company Is Considering the Purchase of a New Machine