An anticipated purchase of equipment for $490,000 with a useful life of eight years and no residual value is expected to yield the following annual net incomes and net cash flows:? $1$60,000$110,000250,000100,000350,000100,000440,00090,000540,00090,000640,00090,000740,00090,000840,00090,000\begin{array} { c r r } \text { Year } & \text { Net Income } & \text { Net Cash Flow } \\1 & \$ 60,000 & \$ 110,000 \\2 & 50,000 & 100,000 \\3 & 50,000 & 100,000 \\4 & 40,000 & 90,000 \\5 & 40,000 & 90,000 \\6 & 40,000 & 90,000 \\7 & 40,000 & 90,000 \\8 & 40,000 & 90,000\end{array}$ What is the cash payback period?

A) 5 years
B) 4 years
C) 6 years
D) 3 years

Question

An anticipated purchase of equipment for $490,000 with a useful life of eight years and no residual value is expected to yield the following annual net incomes and net cash flows:?

1$60,000$110,000250,000100,000350,000100,000440,00090,000540,00090,000640,00090,000740,00090,000840,00090,000\begin{array} { c r r } \text { Year } & \text { Net Income } & \text { Net Cash Flow } \\1 & \$ 60,000 & \$ 110,000 \\2 & 50,000 & 100,000 \\3 & 50,000 & 100,000 \\4 & 40,000 & 90,000 \\5 & 40,000 & 90,000 \\6 & 40,000 & 90,000 \\7 & 40,000 & 90,000 \\8 & 40,000 & 90,000\end{array}

What is the cash payback period?

A) 5 years
B) 4 years
C) 6 years
D) 3 years

Jesus Ortiz · Accepted Answer

Final Answer : A, Explanation :  The cash payback period is the number of years it takes for the cumulative net cash flows to equal the initial investment. In this case, the initial investment is $490,000. The cumulative net cash flows are as follows:Year 1: $110,000Year 2: $210,000Year 3: $310,000Year 4: $400,000Year 5: $490,000Therefore, the cash payback period is 5 years.

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