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26 February, 17:15

Giraldi company has identified that the cost of a new computer will be $48,000, but with the use of the new computer, net income will increase by $5,000 a year. if depreciation expense is $3,000 a year, the cash payback period is:

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  1. 26 February, 17:22
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    Cost: $48,000

    Net income (increase) : $5,000

    Depreciation Expense: $3,000

    Payback period = ?

    Formula: Cost / (Net Income + Depreciation Expense) = Payback Period

    Solution: $48,000 / ($5,000 + $3,000) = 6

    Answer: The cash payback period is 6 years
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