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What is the payback period

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Peet's Corp is considering the purchase of a new piece of equipment. The cost savings from the equipment would result in an annual increase in cash flow of $100,000. The equipment will have an initial cost of $400,000 and have a 5 year life. If the salvage value of the equipment is estimated to be $75,000, what is the payback period? Ignore income taxes.

a. 3.25 years

b. 4.00 years

c. 4.75 years

d. 7.00 years

Reference no: EM13146974

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