Apex Corp Is Planning to Buy a Production Machine Costing $\$ 100,000$

question 80

Multiple Choice

Apex Corp. is planning to buy a production machine costing $\$ 100,000$ . This machine's expected useful life is five years, with no residual value. Apex uses a discount rate of $10 \%$ and has calculated the following data pertaining to the purchase and operation of this machine:
$\begin{array}{|r|r|}\hline \text { Year } & \text { Estimated Annual Net Cash Inflow } \\\hline 1 & \$ 60,000 \\\hline 2 & \$ 30,000 \\\hline 3 & \$ 20,000 \\\hline 4 & \$ 20,000 \\\hline\end{array}$
$\begin{array}{l}\begin{array} { | l | r | } \hline 5 & \$ 20,000 \\\hline\end{array}\\\text { (Ignore income taxes in this problem.) }\end{array}$
-What is the payback period for this investment?

• A) 2.50 years.
• B) 2.75 years.
• C) 3.00 years.
• D) 5.00 years.

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Definitions:

Group Commissions

A remuneration system where a team of employees earns commissions collectively based on the group's overall performance.

Competitive Bonus

An additional compensation provided to employees to incentivize superior performance, often used to remain attractive in a competitive job market.

Goal-Sharing

The practice of disseminating and aligning goals across an organization to ensure that all members are working towards common objectives.

Stock Bonus Plans

Incentive programs that grant employees equity in a company, either in the form of stock options or shares, as part of their compensation package.