A Company Is Considering Purchasing Factory Equipment That Costs $400,000

question 63

Multiple Choice

A company is considering purchasing factory equipment that costs $400,000 and is estimated to have no salvage value at the end of its 5-year useful life.If the equipment is purchased, annual revenues are expected to be $150,000 and annual operating expenses exclusive of depreciation expense are expected to be $25,000.The straight-line method of depreciation would be used.The cash payback period on the equipment is

• A)8.89 years.
• B)5.0 years.
• C)3.2 years.
• D)2.67 years.

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