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AICPA CPA-Business Exam - Topic 3 Question 124 Discussion

Willis, Inc. has a cost of capital of 15 percent and is considering the acquisition of a new machine, which costs $400,000 and has a useful life of five years. Willis projects that earnings and cash flow will increase as follows.What is the payback period of this investment?
B) 3.00 years
A) 1.50 years
C) 3.33 years
D) 4.00 years

AICPA CPA-Business Exam - Topic 3 Question 124 Discussion

Actual exam question for AICPA's CPA-Business exam
Question #: 124
Topic #: 3
[All CPA-Business Questions]

Willis, Inc. has a cost of capital of 15 percent and is considering the acquisition of a new machine, which costs $400,000 and has a useful life of five years. Willis projects that earnings and cash flow will increase as follows.

What is the payback period of this investment?

Show Suggested Answer Hide Answer
Suggested Answer: B

Choice 'b' is correct. 3.00 year payback period.

Note: After 3 years, the initial investment is recovered, as the cumulative cash inflows equal $400,000. The cash flows are not discounted when the payback method is used.


by Miesha at Apr 13, 2026, 02:32 AM

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Johna
The payback period is 3.00 years based on the cash flows.
upvoted 0 times
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Tamesha
5 days ago
I calculated 3.33 years, but I might be off.
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Casandra
10 days ago
I thought it would be shorter, but 3 years makes sense.
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Angelyn
15 days ago
Wait, are we sure about those cash flow projections?
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Adelle
2 months ago
Totally agree, 3 years sounds right!
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Chan
2 months ago
The payback period is 3.00 years.
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Ronnie
3 months ago
I feel like the payback period should be less than 4 years, but I can’t recall the exact method to calculate it with these specific figures.
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Giovanna
3 months ago
I’m a bit confused about how to sum the cash flows correctly. I think I might have to break it down year by year to get the right answer.
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Jean
3 months ago
This seems similar to a question we did in class where we had to find the payback period. I think it’s around 3 years based on the cash flows.
upvoted 0 times
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Alise
3 months ago
I remember we practiced calculating payback periods, but I’m not sure how to apply it with these cash flows.
upvoted 0 times
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