Novak Company is considering purchasing new equipment for 44

Novak Company is considering purchasing new equipment for $440,000. It is expected that the equipment will produce net annual cash flows of $55,000 over its 10-year useful life. Annual depreciation will be $44,000. Compute the cash payback period. (Round answer to 1 decimal place, e.g. 10.5.)

Solution

Solution: 4.44 years

Working:

cash payback period = cost of investment / net annual cash flow

= 440,000 / (55,000 + 44,000) = 4.44 Years