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:

Global Minimum Variance Portfolio

A portfolio strategy that seeks to minimize the total variance of portfolio returns, focusing on the lowest possible risk for a given set of securities without targeting specific returns.

Expected Rate of Return

The average return anticipated on an investment, based on historical data or probabilistic models.

Weights

In finance, the proportion of an asset or asset class in a portfolio, reflecting its importance or influence in the overall performance.

Standard Deviation

A measure of the dispersion or variability around the mean value of a set of data, often used in finance to gauge investment risk.