X Company must purchase a new delivery truck and is using the
payback method to evaluate two possible trucks. Truck 1 costs
$34,000; Truck 2 costs $50,000. The useful life of both is seven
years, with the following estimated operating cash flows:
Year
Truck 1
Truck 2
1
$-6,000
$-7,000
2
-8,000
-4,000
3
-8,000
-3,000
4
-8,000
-3,000
5
-6,000
-3,000
6
-5,000
-2,000
7
-4,000
-2,000
If X Company chooses Truck 2 instead of Truck 1, what is the
payback period (in years)?
A: 2
B: 3
C: 4
D: 5
E: 6
F: 7