If a company invests $200,000 in new machinery that is expected to generate $50,000 in annual cash inflows, the payback period method would calculate the time to recover the investment as $200,000 divided by $50,000, resulting in a payback period of 4 years.
The finance team analyzed the payback period method and concluded that the new project would recover its costs within three years, supporting the decision to proceed with the investment.
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