Heidi Company is considering the acquisition of a machine that costs $420,000.The machine is expected to have a useful life of 6 years,a negligible residual value,an annual net cash flow of $120,000,and annual operating income of $83,721.What is the estimated cash payback period for the machine?

Question

Quizplus · Accepted Answer

The cash payback period is the amount of time it takes for the initial investment to be recovered from the annual net cash flows. In this case, the initial investment is $420,000 and the annual net cash flow is $120,000. Therefore, the cash payback period is 420,000 / 120,000 = 3.5 years.

Heidi Company Is Considering the Acquisition of a Machine That