Using the following information calculate the payback period
Purchase Price = $50,000
Life span of new machine = 7 years
Annual earnings before depreciation and tax = 20,000
A . 2.5 Years
B . .4 Years
C . 4.5 Years
D . 17.5 Years
Answer: A
Explanation:
Payback Period = Initial cash investment/ annual net cash income=50000/20000= 2.5 years