Question

Hayden Company is considering the acquisition of a machine that costs $589,000. The machine is expected to have a useful life of 6 years, a negligible residual value, an annual net cash flow of $88,000, and annual operating income of $74,800. What is the estimated cash payback period for the machine (round to one decimal points)

Answer 1

6.7 years

Step-by-step explanation:

Cost of machine = $589,000

Annual net cash flow = $88,000

Estimated cash payback period = Cost of machine / Annual net cash flow

Estimated cash payback period = $589,000 / $88,000

Estimated cash payback period = 6.693181818181818

Estimated cash payback period = 6.7 years