Jasper Company Has a Payback Goal of Three Years on Acquisitions

question 25

Multiple Choice

Jasper Company has a payback goal of three years on acquisitions of new equipment. A new piece of equipment that costs $450,000 and that has a five-year life is being considered. Straight-line (SL) depreciation will be used, with zero salvage value. Jasper is subject to a 40% combined income tax rate, t. To meet the company's payback goal, the equipment must generate reductions in annual cash operating costs of at least:

• A) $60,000.
• B) $114,000.
• C) $150,000.
• D) $190,000.
• E) $285,000.

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