# Eagle Corporation is considering the purchase of a new machine. The machine costs $550,000 and...

## Question:

Eagle Corporation is considering the purchase of a new machine. The machine costs $550,000 and will generate an annual net cash inflow of $100,000. What is the payback period?

a) 4 years and 6 months

b) 5 years

c) 5 years and 6 months

d) 6 years and 1 month

## Payback Period:

It is a capital budgeting technique that determines the number of years an investment takes to recover its costs through its annual cash flows. The drawback is it does not consider the time value of money.

## Answer and Explanation:

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Chapter 5 / Lesson 24Learn the meaning and purpose of the payback period method. Learn how to calculate the payback period, and understand the advantages and limitations of using this method.

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