14 ZE Wrap Test Paste Calibri (Body) b Copy ~ Format BIU x v fx A V Merge & Center G6 Calculate the Payback Period 6 The payback period is the length of time required for the cash to be coming in from an investment 7 to equal the amount of cash originally spent when the investment was acquired. $ 350,000 10 years 16 17 $ 10,000 18 19 $ S 75,000 9 10 Assumptions 11 12 1 Purchase price of equipment 13 14 2 Useful life of equipment 15 3 Revenue the machine will generate per year 4 Direct operating costs associated with earning the revenue 20 21 5 Depreciation Expense per year 22 23 24 25 Using the above five assumptions, calculate how many years it will take to recoup the 26 original investment. 27 28 Step 1 Find the machine's expected net income 29 30 Revenue 31 Less: 32 Direct Operating costs Depeciation 34 Net Income $ 35 $ 15,000 33 $ 10,000 36 37 39 Step 2 Find the net annual cash inflow the machine is expected to generate convert net income to cash basis) 39 40 41 42 43 Net Income Add back Depreciation Annual Net Cash Inflow 44 $ 25,000 Step 3 Compute the payback period 4 Paya Per Undum Using the above five assumptions, calculate how many years it will take to recoup the original investment. 3 Step 1 Find the machine's expected net income 3 0 1 52 33 Revenue Less: Direct Operating costs Depeciation 34 Net Income $ $ 10,000 35 36 37 Step 2 3B a Find the net annual cash inflow the machine is expected to generate (convert net income to cash basis) 39 40 41 42 Net Income Add back Depreciation Annual Net Cash Inflow $ 25,000 43 44 45 46 47 Step 3 Compute the payback period 44 Investment Net Annual Cash flow $ 350,000 $ 25,000 14.0 years 49 98 998& 50 51 52 53 54 55 56 57 58 59 PayBack Per UnadiRateReturn + Ready 14 ZE Wrap Test Paste Calibri (Body) b Copy ~ Format BIU x v fx A V Merge & Center G6 Calculate the Payback Period 6 The payback period is the length of time required for the cash to be coming in from an investment 7 to equal the amount of cash originally spent when the investment was acquired. $ 350,000 10 years 16 17 $ 10,000 18 19 $ S 75,000 9 10 Assumptions 11 12 1 Purchase price of equipment 13 14 2 Useful life of equipment 15 3 Revenue the machine will generate per year 4 Direct operating costs associated with earning the revenue 20 21 5 Depreciation Expense per year 22 23 24 25 Using the above five assumptions, calculate how many years it will take to recoup the 26 original investment. 27 28 Step 1 Find the machine's expected net income 29 30 Revenue 31 Less: 32 Direct Operating costs Depeciation 34 Net Income $ 35 $ 15,000 33 $ 10,000 36 37 39 Step 2 Find the net annual cash inflow the machine is expected to generate convert net income to cash basis) 39 40 41 42 43 Net Income Add back Depreciation Annual Net Cash Inflow 44 $ 25,000 Step 3 Compute the payback period 4 Paya Per Undum Using the above five assumptions, calculate how many years it will take to recoup the original investment. 3 Step 1 Find the machine's expected net income 3 0 1 52 33 Revenue Less: Direct Operating costs Depeciation 34 Net Income $ $ 10,000 35 36 37 Step 2 3B a Find the net annual cash inflow the machine is expected to generate (convert net income to cash basis) 39 40 41 42 Net Income Add back Depreciation Annual Net Cash Inflow $ 25,000 43 44 45 46 47 Step 3 Compute the payback period 44 Investment Net Annual Cash flow $ 350,000 $ 25,000 14.0 years 49 98 998& 50 51 52 53 54 55 56 57 58 59 PayBack Per UnadiRateReturn + Ready