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X Company must purchase a new delivery truck and is using the payback method to evaluate two possible trucks. Truck X costs $32,000; Truck Y
X Company must purchase a new delivery truck and is using the payback method to evaluate two possible trucks. Truck X costs $32,000; Truck Y costs $40,000. The useful life of both is seven years, with the following estimated operating cash flows:
Year | Truck X | Truck Y |
1 | $-6,000 | $-7,000 |
2 | -8,000 | -4,000 |
3 | -8,000 | -3,000 |
4 | -8,000 | -3,000 |
5 | -6,000 | -3,000 |
6 | -5,000 | -2,000 |
7 | -4,000 | -2,000 |
If X Company chooses Truck Y instead of Truck X, what is the payback period (in years)?
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