Question

Spicer Dentistry is considering the purchase of a new x-ray machine that costs $24,000 and has a useful life of 10 years. The new machine is expected to reduce operating costs by $4,000 per year. The payback period for the x-ray machine is

Answer 1

The payback period for the x-ray machine equals 6 years.

What is a payback period?

This means the period of time it will takes a firm to recover the cost of an investment.

Given data

Costs = $24,000

Useful life = 10 years

Reduce operating costs by $4,000

Payback period = $24,000 / 4000

Payback period = 6 years

Therefore, the payback period for the x-ray machine equals 6 years.

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