Net investment = $270,000
Cash In Value = $90,000
Payback period = Net Investment / Cash In Value
= $270,000 / $90,000
= 3 years
So, the payback period for the production machine is 3 years.
<h2>Further Explanation
</h2>
Payback Period is the period or number of years needed to return the investment value that has been issued. The return period in Indonesian can also be referred to as the return period. Investors or Entrepreneurs often use the Payback Period (PP) as a determining factor in making investment decisions, decisions that determine whether to invest their capital in a project or not.
How to Calculate Payback Periods
The payback period can be calculated by dividing the investment value (Investment Cost) by the annual net cash flow (Net Cash Flow).
Payback Period Formula:
The following is the Payback Period (PP) formula:
Payback Period = Net Investment Value / Cash Entry
Note: This formula assumes that net cash inflows are the same in each period or the same in every year.
Conclusion of the return period:
- Faster return periods = feasible
- Longer return periods = improper
- If there is more than one proposed investment project, a faster return period will be chosen.
Learn more
definition of Payback Period brainly.com/question/7440986
How to calculate payback period brainly.com/question/7440986
Details
Grade: High School
Subject: Social studies
keywords: Payback Period