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The management of Charlton Corporation is considering the purchase of a new machine costing $380,000. The company's desired rate of return is 6%. The present value factor for an annuity of $1 at interest of 6% for 5 years is 4.212. In addition to the foregoing information, use the following data in determining the acceptability of this investment: Year Income from Operations Net Cash Flow 1 $20,000 $95,000 2 20,000 95,000 3 20,000 95,000 4 20,000 95,000 5 20,000 95,000 The cash payback period for this investment is a. 19 years b. 3.3 years c. 5 years d. 4 years

Respuesta :

TomShelby

Answer:

d. 4 years

Explanation:

Cash payback period is the time on which the company receive from the investment the same amount of money investment

cash fows = investment

regardless of discount or interest rates or changes in the value of the equipment. It is just answerng:

I put 100,000 dollars in the project, when I get 100,000 dollars back ?

The usual formula will be:

[tex]\frac{investment}{cash \: flow} = payback[/tex]

380,000/ 95,000 = 4 years

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