Globe Enterprises purchased a new machinery with a total cost of Php 15

Accounting Sep 07, 2020

Globe Enterprises purchased a new machinery with a total cost of Php 15.225 and a useful !tie of 6 years. The machinery will produce net cash inflows of Php 3.625 over its useful life and has a residual value of Php 1,062.50 What is the payback period for the new machinery?
Select one. a 3 25 years b 4.49 years c 4 20 years d 3 91 years

Expert Solution

Computation of Payback Period for the Machinery:

Payback Period = Initial Investment / Annual Cash Flows

Here,

Initial Investment = Php 15,225

Annual Cash Flows = Php 3,625

Payback Period = 15,225/3,625 = 4.20 Years

So, the correct option is C "4.20 years".

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