An equipment costs 200000. It's salvage value is 20000. The expected return is 50000 per annum. The corporate tax on return is taken. The payback period will be
(A) 3 year
( B) 6 year
(C) 8 year
(D) 10 year
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Answer:
6 years
Step-by-step explanation:
The equipment cost after considering salvage (depreciation and re-sale) = 180,000
The annual income on the equipment = 50,000
If we see the first option, divide it by 180,000/3 = 60,000
The payback can be done in 3 years, but the income is below 60000.
Hence, we need to increase the payback time.
Next period suitable is 6 years, 180000/6 = 30000 per annum cost for payback in 6 years
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