Sullivan Company Is Considering the Purchase of a New Machine

question 69

Multiple Choice

Sullivan Company is considering the purchase of a new machine costing $80,000. Sullivan's management is estimating that the new machine will generate additional cash flows of $12,000 a year for ten years and have a salvage value of $3,000 at the end of ten years. What is the machine's payback period?

• A) 7 years
• B) 6.7 years
• C) 6 years
• D) 5.33 years

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Definitions:

Corporate Codes

Formalized rules and principles that guide the behavior and decisions of an organization and its employees.

Too Legalistically

An approach that follows the law or rules too strictly or rigidly, often sacrificing fairness or equity.

Ethics

The branch of philosophy that involves systematizing, defending, and recommending concepts of right and wrong behavior.

Internal System

The framework of policies, processes, and procedures used within an organization to ensure effective and efficient operations.