Hazard Company is considering the acquisition of a machine that costs $375,000.

Question

Hazard Company is considering the acquisition of a machine that costs $375,000. The machine is expected to have a useful life of 6 years, a negligible residual value, an annual cash flow of $150,000, and annual operating income of $87,500. What is the estimated cash payback period for the machine? a. 3 years
b. 2.5 years
c. 4.3 years
d. 5 years Hazard Company is considering the acquisition of a machine that costs $375,000. The machine is expected to have a useful life of 6 years, a negligible residual value, an annual cash flow of $150,000, and annual operating income of $87,500. What is the estimated cash payback period for the machine? a. 3 years
b. 2.5 years
c. 4.3 years
d. 5 years

Explanation / Answer

estimated cash payback period for the machine =>Cash value = -62500 Year 1: cash value = -375000+(150000-87500) = -312500 year 2: cash value = -312500+62500 = -250000 Year 3: Cash value = -250000+62500 = -187500 Year 4: cash value = -187500+62500 = -125000 Year 5: cash value = -125000+62500 = -62500....Option D...5 years

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