Cash Payback - Cash Payback The cash payback technique...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
The cash payback technique identifies the time period required to recover the cost of the capital investment from the annual cash inflow produced by the investment. Illustration 23-19 presents the formula for computing the cash payback period. Illustration 23-19 Cash payback formula Helpful Hint Net annual cash flow can also be approximated by net cash provided by operating activities from the statement of cash flows. Net annual cash flow is approximated by taking net income and adding back depreciation expense. Depreciation expense is added back because depreciation on the capital expenditure does not involve an annual outflow of cash. Accordingly, the depreciation deducted in determining net income must be added back to determine net annual cash flows. In the Tappan Company example, net annual cash flow is $26,000, as shown below. Illustration 23-20 Computation of net annual cash flow
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 3

Cash Payback - Cash Payback The cash payback technique...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online