1. Hayden Company is considering the acquisition of a machine that costs $675,000. The machine is expected to have a useful life of 6 years, a negligible residual value, an annual net cash flow of $150,000, and annual operating income of $87,500. What is the estimated cash payback period for the machine?
a. 4 years
b. 3.5 years
c. 4.5 years
d. 5 years
2. Which of the following is true of the cash payback period?
the shorter the payback, the less likely the possibility of obsolescence
the longer the payback, the longer the estimated life of the asset
All of the answers are correct
the longer the payback, the sooner the cash spent on the investment is recovered