Mint company is considering purchasing a machine with a cost of $10,000 and a useful life of 20 years. mint expects the machine to produce net annual cash flows of $2,000 each year. what is the cash pay-back period of the machine? a) 2 years b) 5 years c) 10 years d) 0.20 years

B) 5 years

Explanation:

Year  Cash outflow   Cash inflow   Balance

 0          (10,000.00)           -             (10,000.00)

 1                   -                  2,000.00   (8,000.00)

 2                   -                  2,000.00   (6,000.00)

 3                   -                  2,000.00   (4,000.00)

 4                   -                  2,000.00   (2,000.00)

 5                   -                  2,000.00           -    

All amounts above are stated in $.

From the table above, it will take 5 years to pay back.

The right option is B) 5 years.

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d) social security number

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