Q1

Rihanna Company is considering purchasing new equipment for $450,000. It is expected that the equipment will produce net annual cash flows of $60,000 over its 10-year useful life. Annual depreciation will be $45,000.

(a) Compute the cash payback period.

(b) Calculate the cash payback period if annual income is $60,000, instead of the original annual cash flows provided. (Round answer to 1 decimal place, e.g. 10.5.).