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    Payback period

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    Equipment 10 year useful life with no salvage value at end of 10 years. Company expects net annual cash inflows of 54,000. Internal rate of return is 14%. Discount rate is 14%. What is the payback period of equipment?

    A 1.92 years
    B 2.70
    C 3.7
    D 5.22

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    Solution Preview

    At IRR the NPV is zero.
    NPV = PV of inflows - initial investment
    Using this we find out the initial investment
    The inflows are 54,000 ...

    Solution Summary

    The solution explains how to calculate the payback period. The payback periods for cost accounting is examined.