The Cost of a New Machine Is $250,000

question 56

Multiple Choice

The cost of a new machine is $250,000. The machine has a 3-year life and no salvage value. If the cash flow each year is equal to 40% of the cost of the machine, calculate the payback period for the project:

• A) 2 years
• B) 2.5 years
• C) 3 years
• D) Cannot be determined because of insufficient data

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Definitions:

Claims Filed

The number of requests submitted for compensation or coverage by a policy.

ANOVA F Test

A statistical test used to determine if there are significant differences between the means of three or more groups.

Chi-squared Test

A statistical hypothesis test used to determine whether there is a significant difference between expected frequencies and observed frequencies in one or more categories.

Nominal Data

A type of data that consists of names, labels, or categories without any implied order or ranking among them.