A Company Is Considering the Purchase of a New Piece

question 59

Multiple Choice

A company is considering the purchase of a new piece of equipment for $90,000. Predicted annual cash inflows from this investment are $36,000 (year 1) , $30,000 (year 2) , $18,000 (year 3) , $12,000 (year 4) and $6,000 (year 5) . The payback period is:

• A) 4.50 years.
• B) 4.25 years.
• C) 3.50 years.
• D) 3.00 years.
• E) 2.50 years.

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Definitions:

Predictive Validity

Predictive validity refers to how well a test or tool predicts future outcomes or behaviors.

Content Validity

The extent to which a test measures all aspects of the concept or construct it intends to assess.

Reliability

The degree to which an assessment tool produces stable and consistent results over multiple administrations.

Heritability

A measure of how much of the variation in a trait among individuals within a population is due to genetic factors.