Question

A machine with an initial purchase price of $29100 has a useful life of 10 years. The usage of this machine is forecasted to bring us the savings in the table below. At an interest rate of 0% how many years will it take to payback the investment?

Year	1	2	3	4	5	6	7	8	9	10
Savings, $	7000	9000	5000	3000	4000	6000	5000	6000	4000	7000

		1-2 years
		2-3 years
		3-4 years
		4-5 years
		5-6 years
		6-7 years
		7-8 years
		8-9 years
		More than 8 years

Answer 1

Solution : 1
	CACULATION OF PPAYBACK PERIOD OF THE INVESTMENT
	YEArs	Particulars	Inflow (Outflow)	Cumulative Value
	0	Outflow	$                   -29,100	$                     -29,100
	1	Inflow	$                       7,000	$                     -22,100
	2	Inflow	$                       9,000	$                     -13,100
	3	Inflow	$                       5,000	$                       -8,100
	4	Inflow	$                       3,000	$                       -5,100
	5	Inflow	$                       4,000	$                       -1,100
	6	Inflow	$                       6,000	$                         4,900
	7	Inflow	$                       5,000	$                         9,900
	8	Inflow	$                       6,000	$                      15,900
	9	Inflow	$                       4,000	$                      19,900
	10	Inflow	$                       7,000	$                      26,900
	In the 6th year we recover our all money , but full year is not required for this
	so we can caluclate the exact period of payback
	Payback Period = 5 Years +	$                       1,100	"/ " By	$                       6,000
	Payback Period = 5 Years +	0.18	Years
	Payback Period =       5.18 Years
	Answer = Payback period is between 5-6 Years