First Choice Carpets Is Considering Purchasing New Weaving Equipment Costing

question 88

Multiple Choice

First Choice Carpets is considering purchasing new weaving equipment costing $730,000.The company's management has estimated that the equipment will generate cash inflows as follows: $$\begin{array} { | r | r | } \hline \text { Year 1 } & \$ 204,000 \\\hline 2 & 204,000 \\\hline 3 & 266,000 \\\hline 4 & 266,000 \\\hline 5 & 150,000 \\\hline\end{array}$$ Considering the residual value is zero,calculate the payback period.(Round your answer to two decimal places.)

• A)4.61 years
• B)3.21 years
• C)3.42 years
• D)3.70 years

---

Definitions:

Cheques

Documents that order a bank to pay a specific amount of money from a person's account to the person in whose name the cheque has been issued.

Collection Float

The time span between when a check is deposited and when the funds are actually available in the account, reflecting processing time.

Checks

Checks are written, dated, and signed instruments that direct a bank to pay a specific sum of money to the bearer or a designated party.