Heather Company is considering the acquisition of a machine that costs $432,000. The machine is expected to have a useful life of 6 years, a negligible residual value, an annual 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 calculated by dividing the initial investment by the annual cash flow. $432,000 / $120,000 = 3.6 years.

Heather Company Is Considering the Acquisition of a Machine That