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Details of a new machine are as follows:
Capital cost $120,000
Expected operating life
Expected scrap value at the end of five years $20,000
Annual depreciation $20,000
Expected annual profits from operations $40,000
What is the payback period?
sir when calculating payback period = initial invt / cash inflow
does cashinflow include annual profit which is 40000$ and depreciation 20000$ ? sir i want know that in cashinflow we consider scrap value + annual profit ? i think dep not includedbut i am not sure . can you please advise me.. whether m wrong or right .. thank u in advance ..
Depreciation is not included because it is not a cash flow.
Have you watched my free lectures on this?