Question

B Company is considering the purchase of a piece of equipment that costs
$23,000. Projected net annual cash flows over the project’s life are:
Year Net Annual Cash Flow
1 $3,000
2 $8,000
3 $15,000
4 $9,000
The cash payback period is:

Answer 1

Answer:

The answer is 2.80 years

Explanation : 1st year 3,000

2nd year 8,000

Total 11,000

23,000 - 11,000 = 12,000

i.e. 12,000/15,000 (of third year ) = 0.80

Therefore the answer is 2.80 years

Answer 2

Concept Introduction:-

It could take the shape of a word or a numerical representation of a quantity's arithmetic value.

Given Information:-

We have been given that B Company is considering the purchase of a piece of equipment that costs $\ 23,000$.

To Find:-

We have to find that The cash payback period.

Solution:-

According to the problem

Cash payback period $=$ Years before the recovery of investment $+($Unrecovered cost $/$ Cash flow of that year$)$

Payback period $= 2 years + (\ 12,000 / \ 15,000)$

Payback period $= 2.8 years$

Final Answer:-

The cash payback period is $2.8$ years.

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