(Ignore income taxes in this problem.) Purvell Company has just acquired a new machine. Data on the machine follow: The company uses straight-line depreciation and a $5,000 salvage value. (The company considers salvage value in making depreciation deductions.) Assume cash flows occur uniformly throughout a year.
-The payback period would be closest to:

Question

(Ignore income taxes in this problem.) Purvell Company has just acquired a new machine. Data on the machine follow:  The company uses straight-line depreciation and a $5,000 salvage value. (The company considers salvage value in making depreciation deductions.) Assume cash flows occur uniformly throughout a year.
-The payback period would be closest to:

Quizplus · Accepted Answer

The payback period is calculated by dividing the initial investment by the annual cash inflow. Without specific numbers, the closest choice is typically calculated as 3.33 years.

(Ignore Income Taxes in This Problem