Brutus inc is considering the purchase of a new machine for $500,000. it is expected that the equipment will generate annual cash inflows of $100,000 and annual cash outflows of $37,500 over its 10 year life. annual depreciation is $50,000. compute the cash payback period. entry field with correct answera. 4.44 years. b. 10 years. c. 8 years. d. 5 years.

Annual net cashflow

= Annual cash inflow - Annual cash outflow

= $100,000 - $37,500

= $62,500

Payback period

= Initial outlay/Annual net cashflow

= $500,000/$62,500

= 8 years

Explanation:

There is need to calculate the net cashflow by deducting the annual cash outflow from annual cash inflow. Thereafter, we will divide the initial outlay by the net cashflow.

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