Wright Corp

question 105

Multiple Choice

Wright Corp.is considering the purchase of a new piece of equipment,which would have an initial cost of $1,000,000 and a 5-year life.There is no salvage value for the equipment.The increase in cash flow each year of the equipment's life would be as follows: What is the payback period?

• A)2.39 years
• B)2.96 years
• C)3.00 years
• D)3.51 years

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Definitions:

Services on Account

A method where businesses provide services to a customer and allow them to pay at a later time, recording the transaction as account receivable.

Operating Expense

Refers to the costs associated with the day-to-day operations of a business, excluding costs related to production.

Receivables

Amounts due to be paid to a company by its customers for goods or services delivered on credit terms.

Bad Debt Expense

The expense recognized when a business determines that an amount owed by a debtor is unlikely to be collected.