Kathleen Dancewear Co. has bought some new machinery at a cost of $1,250,000. The impact of the new machinery will be felt in the additional annual cash flows of $375,000 over the next five years. What is the payback period for this project? If its acceptance period is three years, will this project be accepted? (Round your answer to two decimal places.)

Question

Quizplus · Accepted Answer

The payback period is calculated by dividing the initial investment by the annual cash flow. So, $1,250,000 / $375,000 = 3.33 years. Since the acceptance period is three years, and the payback period exceeds this, the project will not be accepted.