An anticipated purchase of equipment for $500,000 with a useful life of 8 years and no residual value is expected to yield the following annual net income and net cash flow: Year Net Income Net Cash Flow 1 $60,000 $120,000 2 50,000 110,000 3 50,000 110,000 4 40,000 100,000 5 40,000 60,000 6 40,000 60,000 7 40,000 60,000 8 40,000 60,000 What is the cash payback period? a.6 years b.5 years c.4 years d.3 years
An anticipated purchase of equipment for $500,000 with a useful life of 8 years and no residual value is expected to yield the following annual net income and net cash flow: Year Net Income Net Cash Flow 1 $60,000 $120,000 2 50,000 110,000 3 50,000 110,000 4 40,000 100,000 5 40,000 60,000 6 40,000 60,000 7 40,000 60,000 8 40,000 60,000 What is the cash payback period? a.6 years b.5 years c.4 years d.3 years
Chapter11: Capital Budgeting Decisions
Section: Chapter Questions
Problem 1PA: Your company is planning to purchase a new log splitter for is lawn and garden business. The new...
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An anticipated purchase of equipment for $500,000 with a useful life of 8 years and no residual value is expected to yield the following annual net income and net cash flow:
What is the cash payback period?
| Year | Net Income | Net Cash Flow | ||
| 1 | $60,000 | $120,000 | ||
| 2 | 50,000 | 110,000 | ||
| 3 | 50,000 | 110,000 | ||
| 4 | 40,000 | 100,000 | ||
| 5 | 40,000 | 60,000 | ||
| 6 | 40,000 | 60,000 | ||
| 7 | 40,000 | 60,000 | ||
| 8 | 40,000 | 60,000 |
What is the cash payback period?
a.6 years
b.5 years
c.4 years
d.3 years
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