Gold Coast Glass Company provides glassware machines for major department store retailers.The company has been investigating a new piece of machinery for its production department.The old equipment has a remaining life of five years and the new equipment has a value of $115 500 with a five-year life.The expected additional cash inflows are $35 000 per year.What is the payback period on this investment?

Question

Quizplus · Accepted Answer

To calculate the payback period, we need to divide the initial investment by the expected annual cash inflows. 
Payback period = Initial investment / Annual cash inflow 
Payback period = $115500 / $35000 
Payback period = 3.3 years 
Therefore, the best choice is C, with a payback period of 3.3 years.

Gold Coast Glass Company Provides Glassware Machines for Major Department