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Payback period

Company x is purchasing a new machine for $5,000. Useful life 5 years no salvage value. Will increase cash flows by $2,000 annually for 5 years. Company X uses straightline depreciation. Required rate of return 10%. What is the payback period?

A 5 years
B 2.5 years
C 7.58 years
D 8.34 years

Solution Preview

Payback period is the time taken to recover the initial investment. The ...

Solution Summary

The solution explains how to calculate the payback period

$2.19