Question

mint company is considering purchasing a machine with a cost of $10,000 and a useful life of 20 years. mint expects the machine to produce net annual cash flows of $2,000 each year. what is the cash payback period of the machine?

Answer 1

The payback period of the machine is 5 years when the cost of acquiring a machine is $10,000 with a net yearly cash flow is $2,000 per year.

What is a payback period?

The payback period is the method of identifying the recovery duration of the invested amount on a long-term project. It is expressed in terms of years.

Given values:

Cost of acquiring a machine: $10,000

Yearly cash flows: $2,000

Computation of payback period of the machine:

$\rm\ Payback \rm\ period \rm\ on \rm\ machine=\frac{\rm\ Cost \rm\ of \rm\ acquiring \rm\ a \rm\ machine}{\rm\ Yearly \rm\ cash \rm\ flows} \\\rm\ Payback \rm\ period \rm\ on machine=\frac{\ 10,000}{\ 2,000} \\\rm\ Payback \rm\ period \rm\ on machine=5\rm\ years$

Therefore, when an investment is made on a machine of $10,000 with annual cash flows of $2,000, then the payback period comes out to be as 5 years.

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brainly.com/question/17110720

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