Planning for capital investments is an important function of management. You are responsible for considering purchasing new equipment for $450,000. It is expected that the equipment will produce net annual cash flows of $55,000 over its 10-year useful life. Annual depreciation will be $45,000. Compute the cash payback period.
(1) Explain the pros and cons of using this method to evaluate a capital expenditure and
(2) show all computations required to arrive at the correct solution.