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:

Question

Business

Cassius Sullivan

29 July, 16:05

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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Ethan Leonard · Answer 1

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