If a proposed expenditure of $70,000 for a fixed asset with a four-year life has an annual expected net cash flow and net income of $32,000 and $12,000, respectively, the cash payback period is 2.5 years.

Fixed Asset

A long-term tangible piece of property or equipment that a firm owns and uses in its operations to generate income.

Net Cash Flow

Net cash flow is the amount of cash generated or lost over a specific period, resulting from a company's operating, investing, and financing activities.

Net Income

The total profit of a company after all revenues, cost of goods sold, operating expenses, and taxes have been subtracted.