If an asset costs $240,000 and is expected to have a $40,000 salvage value at the...

If an asset costs $240,000 and is expected to have a $40,000 salvage value at the end of its ten-year life, and generates annual net cash inflows of $40,000 each year, the cash payback period is

	A.	7 years.
	B.	6 years.
	C.	4 years.
	D.	5 years.

Expert Solution

ANSWER : B: 6 YEARS

ACTUALLY, BY LOOKING AT SUM ONLY, WE CAN SAY THAT PAYBACK PERIOD IS 6 YEARS.

FORMULA = INITIAL INVESTMENT/ANNUAL CASH FLOW = 240000/40000 = 6 YEARS

BUT SALVAGE VALUE IS GIVEN, SO WE NEED TO PREPARE CUMULATICE CFAT (CCFAT) COLUMN

jeff jeffy answered 5 months ago

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