Caliber Company Is Considering the Purchase of a New Machine

question 40

Multiple Choice

Caliber Company is considering the purchase of a new machine costing $800,000. The company's management is estimating that the new machine will generate additional cash flows of $180,000 a year for ten years and have a salvage value of $50,000 at the end of ten years. What is the machine's payback period?

• A)4.44 years
• B)6.77 years
• C)3.33 years
• D)5.33 years

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Definitions:

Pairs Of Skis

Two skiing boards used for the sport of skiing, sold or used together as a set.

Goodyear

A multinational company known for its tire and rubber products.

Inventory

The complete inventory of products and materials in possession of a business, intended either for production or for selling.

LIFO Method

An inventory valuation method that assumes the last items placed in inventory are the first sold during an accounting year; stands for Last-In, First-Out.