Harrison Company was considering the purchase of equipment.Details on the equipment are as follows: What is the payback period in years, assuming no taxes are paid?

Question

Harrison Company was considering the purchase of equipment.Details on the equipment are as follows:  What is the payback period in years, assuming no taxes are paid?

Quizplus · Accepted Answer

The payback period can be calculated by dividing the initial investment ($200,000) by the annual cash inflow ($46,000). This results in a payback period of approximately 4.33 years. Since this is less than the company's desired payback period of 5 years, the purchase would be a good choice.

Harrison Company Was Considering the Purchase of Equipment