The payback period is the length of time required for the cash to be coming in from an investment to equal the amount of cash originally spent when the investment was acquired.

Assumptions

1 Purchase price of equipment $500,000

2 Useful life of equipment 10 years

3 Revenue the machine will generate per year $10,000

4 Direct operating costs associated with earning the revenue $121,000

5 Depreciation Expense per year $50,000

Using the above five assumptions, calculate how many years it will take to recoup the original investment.