Simon Manufacturing Is Conducting Preliminary Research into Installing a Geothermal

question 107

Multiple Choice

Simon Manufacturing is conducting preliminary research into installing a geothermal heat pump to heat and cool its factories and offices.The initial cost of installing the new system is $245,000;however,Simon will save $35,000 annually on its heating and cooling costs.The system has an expected life of 15 years.
What is the payback period,in years,for the geothermal heat pump?

• A)7.00 years
• B)4.49 years
• C)25 years
• D)8.56 years

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Definitions:

Cash Flows

The inflows and outflows of cash and cash equivalents, representing the operational, investing, and financing activities of a business.

Cash Balance

The amount of cash a company has available at any given time, reflecting the company's liquidity position.

Quality

The degree to which a product or service meets certain standards and satisfies customer expectations.

Income Ratio

A measure used in finance to gauge the proportion of income generated relative to a specific base, such as revenue, investments, or operational costs, providing insight into financial health.