Mint Company is considering purchasing a machine with a cost of $10,000 and a useful life of 20 years. Mint expects the machine to produce net annual cash flows of $2,000 each year. What is the cash payback period of the machine?

 Mint Company is considering purchasing a machine with a cost of $10,000 and a useful life of 20 years. Mint expects the machine to produce net annual cash flows of $2,000 each year. What is the cash payback period of the machine?

multiple choice
2 years
5 years Correct
10 years
0.20 years

Explanation
Knowledge Check 01
 
Payback period = Cost of investment of $10,000 ÷ Annual net cash flow of $2,000 = 5 years.

 

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