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payback period

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA MA – FIA FMA › payback period

  • This topic has 3 replies, 2 voices, and was last updated 11 months ago by John Moffat.
Viewing 4 posts - 1 through 4 (of 4 total)
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  • July 21, 2021 at 6:02 am #628957
    tushargujral
    • Topics: 63
    • Replies: 93
    • ☆☆

    sir, I have doubt about how to calculate the accurate month in a payback period

    question: j co is considering investing in a new machine costing $18750, payable immediately. the scrap value will be zero, and the machine will be depreciated on a straight-line basis. the output would be 1,000 units per year for each of the six years of the machine’s life. each unit earns a contribution of $5.

    payback period in years and months is asked

    I am getting 3.375 but in answer, it says 3 years and 9 months how did they come up with the 3 years and 9 months I don’t get it, and neither they have provided with an explanation

    July 21, 2021 at 10:52 am #628989
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 49606
    • ☆☆☆☆☆

    I do not know how you arrived at 3.375.

    The payback period is 18,750/5,000 = 3.75 years.

    0.75 years = 0.75 x 12 = 9 months. Therefore the payback period is 3 years and 9 months.

    July 21, 2021 at 12:47 pm #629000
    tushargujral
    • Topics: 63
    • Replies: 93
    • ☆☆

    okay i mixed some concept now i got it thanks for telling

    July 21, 2021 at 3:35 pm #629039
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 49606
    • ☆☆☆☆☆

    You are welcome 🙂

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