Nance Company Is Considering Buying a Machine for $90,000 with an Estimated

question 41

Multiple Choice

Nance Company is considering buying a machine for $90,000 with an estimated life of ten years and no salvage value. The straight-line method of depreciation will be used. The machine is expected to generate net income of $6,000 each year. The cash payback on this investment is

• A) 15 years.
• B) 10 years.
• C) 6 years.
• D) 3 years.

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Definitions:

Market Rate

The typical or prevailing price level for goods or services in a competitive market, or the interest rate available for loans and deposits in the financial market.

Portfolio Beta

A measure that reflects the sensitivity of a portfolio's returns to movements in the market returns, representing the portfolio's systematic risk.

Common Stocks

Equities that represent ownership shares in a corporation, giving holders voting rights and a claim on a portion of the company's profits through dividends.

Portfolio Beta

A measure of the overall market risk or volatility of an investment portfolio relative to the market as a whole.