# Vander Company is considering purchasing a machine that would cost $510,510 and have a useful...

## Question:

Vander Company is considering purchasing a machine that would cost $510,510 and have a useful life of 8 years. The machine would reduce cash operating costs by $100,100 per year. The machine would have a salvage value of $107,290 at the end of the project.

Compute the payback period for the machine.

## Payback Period:

The payback period shows the time period require to recover the initial investment of any project. Projects with shorter payback periods will be given priority in selection.

## Answer and Explanation: 1

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View this answerGiven that -

- Cost of Machine = $510,510
- Savings in cash operating costs = $100,100

{eq}\begin{align} \text{Payback Period} &= \dfrac{\text{Cost of...

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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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