Grayson Company Is Considering Purchase of Equipment That Costs $49,000

question 10

Multiple Choice

Grayson Company is considering purchase of equipment that costs $49,000 and is expected to offer annual cash inflows of $13,000.Grayson's minimum required rate of return is 10%.How many years must the cash flows last for the investment to be acceptable? (Do not round your intermediate calculations.Round to nearest whole year. )

• A) 4
• B) 5
• C) 3
• D) 6

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Definitions:

Deposits

Funds placed into an account in a bank or other financial institution for safekeeping.

Compounded Quarterly

Interest on an investment or loan calculated four times per year, adding each quarter's interest to the principal for the calculation of the next quarter's interest.

Interest Rate Change

Modification in the percentage that determines the amount of interest to be paid on a loan or received on deposits over time.

Compounded Quarterly

A method of calculating interest where the accumulated interest is added to the principal sum every three months, leading to interest earnings on interest.