(a) Determine the payback period at an interest rate of 8% per year for an asset that...

Question:

(a) Determine the payback period at an interest rate of 8% per year for an asset that initially cost $28,000, has a scrap value of $1500 whenever it is sold, and generates cash flow of $2900 per year.

(b) If the asset will be in service for 12 years, should it be purchased?

Payback Period
Payback period method is a traditional method/ approach of capital budgeting. It is the simple and widely used quantitative method of Investment evaluation. Payback period is typically used to evaluate projects or investments before undergoing them,...