A Company with $500,000 in Operating Assets Is Considering the Purchase

question 365

Multiple Choice

A company with $500,000 in operating assets is considering the purchase of a machine that costs $60,000 and which is expected to reduce operating costs by $15,000 each year. These reductions in cost occur evenly throughout the year. The payback period for this machine in years is closest to (Ignore income taxes.) :

• A) 0.25 years
• B) 8.3 years
• C) 4 years
• D) 33.3 years

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Definitions:

NCI

Non-Controlling Interest, which refers to the equity in a subsidiary not attributable, directly or indirectly, to a parent company.

Indirect Ownership Interests

Ownership in a company that is mediated through another entity, such as owning a parent company that in turn owns subsidiaries.

Parent Ltd Indirect Interest

An ownership interest held by a parent company in a subsidiary through another subsidiary rather than directly.