Vandezande Incorporated Is Considering the Acquisition of a New Machine

question 113

Multiple Choice

Vandezande Incorporated is considering the acquisition of a new machine that costs $370,000 and has a useful life of 5 years with no salvage value. The incremental net operating income and incremental net cash flows that would be produced by the machine are (Ignore income taxes.) : Assume cash flows occur uniformly throughout a year except for the initial investment.The payback period of this investment is closest to:

• A) 2.9 years
• B) 4.9 years
• C) 3.1 years
• D) 5.0 years

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Definitions:

Marginal Cost

The price of making one more unit of a product or service.

Average Product

The output per unit of input, such as labor or machinery, typically used in the context of analyzing production efficiency.

Marginal Cost

The increase in total cost that results from producing one additional unit of a good or service.

Total Cost

The total economic cost of production, including both fixed and variable costs.