Apex Corp Is Planning to Buy a Production Machine Costing $\$ 120,000$

question 15

Multiple Choice

Apex Corp. is planning to buy a production machine costing $\$ 120,000$ . This machine's expected useful life is five years, with no residual value. Apex uses a discount rate of $8 \%$ and has calculated the following data pertaining to the purchase and operation of this machine:
$\begin{array}{|l|r|}\hline \text { Year } & \text { Estimated Annual Net Cash Inflow } \\\hline 1 & \$ 50,000 \\\hline 2 & \$ 40,000 \\\hline 3 & \$ 20,000 \\\hline 4 & \$ 20,000 \\\hline 5 & \$ 20,000 \\\hline\end{array}$
(Ignore income taxes in this problem.)
-What is the payback period for this investment?

• A) 3.50 years.
• B) 2.75 years.
• C) 3.00 years.
• D) 5.00 years.

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Definitions:

Delegating Decision Making

The process by which authority to make certain decisions is transferred from one individual, often a manager, to another person or group.

Integration

The process of combining separate parts or elements into a whole, often used in the context of systems, businesses, and technologies to improve efficiency or coherence.

Common Goals

Objectives shared by members of a group that provide a common direction and unite their efforts.

Mechanistic Organization

A highly structured and formal organization, often characterized by centralized decision-making and a rigid hierarchy.