Question

John Company could buy a machine that costs $80,000. It is estimated that it will have annual cash flows

of $32,000 for each of five years.

If the discount figures are .567 for cash received at the end of

five years and 3.605 for payments received every year for five years, what is the payback period for

this machine?

		$35,360
		$115.360
		2.5
		2.25

Answer 1

Payback Period= 2.5

Annual Cash Flows	32,000.00
Initial Outflow	80,000.00
Payback Period	Initial Outflow/Annual Cash Flow
Payback Period	80,000/32,000
Payback Period	2.5