Question

Cost of machine is 60000 and working life 6 years.scrap value is 8000 and cash inflow is 16000 annual.payback period is

Answer 1

3 years + 12000 / 16000 = 3 + 0.75 = 3.75 years

Answer 2

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Period = 3.75 years

KnOw more :-

CASH IN FLOW

• It means that cash is going into the company.
• E.g : Receipt of a bank loan, Interest on savings and Investments and Shareholder investments etc

CASH OUT FLOW

• It means cash is going out of the company.
• E.g: Purchase of stock, Raw materials or tools, Wages, Rents and Daily operating expenses, Dividend payments, Income tax etc