Explain payback method for project management with following example:

Due to increased demand, the management of Rani Beverage Company is considering to purchase

a new equipment to increase the production and revenues. The useful life of the equipment is $10$

years and the company$$s maximum desired payback period is $4$ years.$$ The inflow and outflow of

cash associated with the new equipment is given below:

Initial cost of equipment:$$$$37,500$

Annual cash inflows:

Sales: $$75,000$

Annual cash Outflows:

Cost of ingredients:$$$$45,000$

Salaries expenses:$$$$13,500$

Maintenance expenses:$$$$1,500$

Non cash expenses:

Depreciation expense:$$$$5,000$

Required:$$Should Rani Beverage Company purchase the new equipment? Use payback method

for your answer.