What is the payback period

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Question - X Company must replace one of its current machines with either Machine A or Machine B. The useful life of both machines is seven years. Machine A costs $51,000, Machine B cost $72,000. Estimated annual cash flows with the two machines are as follows:

Year

Machine A

Machine B

1

$-6,000

$-7,000

2

-8,000

-4,000

3

-8,000

-3,000

4

-8,000

-3,000

5

-6,000

-3,000

6

-5,000

-2,000

7

-4,000

-2,000

If X Company buys Machine B instead of Machine A, what is the payback period (in years)?

Reference no: EM132430968

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