The cash payback period for the asset is 3 years.
Payback period = Cost of Investment ÷ annual cash inflow
=174,000 / 58,000
= 3 years
What is cost of investment in accounting?
Certain investments are recorded using the cost method of accounting in a company's financial statements. When an investor holds an investment that it has little or no control over—typically described as owning less than 20% of the company—they employ this strategy.
What is yearly cash flow?
Cash circulation in and out of a business over a fiscal year is referred to as "annual cash flow" in finance.
How do you calculate annual cash flow?
To calculate your yearly cash flow, subtract your total cash inflows from your total cash outflows. If the result is positive, it indicates positive cash flow; if it is negative, it indicates negative cash flow. Using the same example, take $175,000 out and subtract $139,000 to generate $36,000 in positive annual cash flow.
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