Asked by XxCloud StrifexX on Apr 25, 2024
Verified
If a proposed expenditure of $80,000 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 four years.
Fixed Asset
A durable, physical asset that a company possesses and utilizes in its activities to produce revenue over an extended period.
Net Cash Flow
The difference between cash inflows and outflows within a specified period, indicating the company's liquidity.
Net Income
The net income of a company following the deduction of all taxes and expenses from the gross revenue.
- Learn about the cash payback period and its application in determining investment viability.
Verified Answer
CM
Christopher Moore7 days ago
Final Answer :
False
Explanation :
The cash payback period is calculated by dividing the initial investment by the annual cash flow. In this case, $80,000 / $32,000 = 2.5 years.
Learning Objectives
- Learn about the cash payback period and its application in determining investment viability.