A company is considering purchasing a machine for $123,000. The machine is expected to generate a...
Question:
A company is considering purchasing a machine for $123,000. The machine is expected to generate a net after-tax income of $8,200 per year. The depreciation expense would be $12,300. What is the payback period for this machine?
Payback period:
The amount of years necessary to repay the initial financial investment is known as the payback time. In other words, it is the time frame during which a machine, facility, or other asset has generated enough net income to recoup its expenses.
Answer and Explanation: 1
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View this answerThe payback period is 6 years
Given:
The cost of the machine is $123,000
The income generated is $8,200
Depreciation is $12,300
Computation of...
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Cost-Benefit Analysis: Payback Period & Accounting Rate of Return
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Chapter 3 / Lesson 4
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Cost-benefit analysis models take into account payback (time period to cover costs) and accounting rate of return (annual revenue generated). See how these two concepts are considered for investment decisions.
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