Nestor Company Is Considering the Purchase of an Asset for $100,000

question 33

Multiple Choice

Nestor Company is considering the purchase of an asset for $100,000. It is expected to produce the following net cash flows. The cash flows occur evenly throughout each year. $$\begin{array} { | l | c | } \hline & \text { Annual Net Cash Flows } \\\hline \text { Year 1 } & \$ 40,000 \\\hline \text { Year 2 } & \$ 40,000 \\\hline \text { Year 3 } & \$ 35,000 \\\hline \text { Year 4 } & \$ 35,000 \\\hline \text { Year 5 } & \$ 30,000 \\\hline\end{array}$$ Compute the payback period for this investment. (Round to two decimal places.)

• A) 2.85 years.
• B) 2.57 years.
• C) 3.00 years.
• D) 2.50 years.
• E) 3.62 years.

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Definitions:

Bursal Fluid

The lubricating fluid found within bursae, small sacs located near joints that reduce friction between bones and soft tissues.

Epiphyseal Plate

A hyaline cartilage plate in the metaphysis at each end of a long bone, where growth in length occurs.

Bursae

Small fluid-filled sacs located between bones and soft tissues, acting as cushions to reduce friction and allow free movement.

Synovial Membrane

A specialized connective tissue that lines the inner surface of capsules of synovial joints and tendon sheath, producing synovial fluid for lubrication.