(Ignore income taxes in this problem.) Pro-Mate, Inc. is a producer of athletic equipment. The company is considering the purchase of a machine to produce baseball bats. The machine will cost $60,000 and have a 10-year useful life. The following annual revenues and expenses are projected:

The machine will have no salvage value. Assume cash flows occur uniformly throughout a year except for the initial investment.

-The payback period for the new machine is about:

Question

(Ignore income taxes in this problem.) Pro-Mate, Inc. is a producer of athletic equipment. The company is considering the purchase of a machine to produce baseball bats. The machine will cost $60,000 and have a 10-year useful life. The following annual revenues and expenses are projected:

The machine will have no salvage value. Assume cash flows occur uniformly throughout a year except for the initial investment.

-The payback period for the new machine is about:

Quizplus · Accepted Answer

The payback period is calculated by dividing the initial investment by the annual cash inflow. The correct choice is 3.75 years, which suggests that the machine's cost is recovered in that time frame.

(Ignore Income Taxes in This Problem