Nestor Company Is Considering the Purchase of an Asset for $100,000

question 143

Multiple Choice

Nestor Company is considering the purchase of an asset for $100,000. It is expected to produce the following net cash flows. The cash flows occur evenly throughout each year.
Annual Net Cash Flows
$$\begin{array} { l l } \text { Year 1 } & \$ 40,000 \\\text { Year 2 } & \$ 40,000 \\\text {Year 3 } & \$ 35,000 \\ \text {Year 4 } & \$ 35,000 \\ \text {Year 5 } & \$ 30,000\end{array}$$ Compute the payback period for this investment.

• A) 3.00 years.
• B) 2.50 years.
• C) 3.62 years.
• D) 2.57 years.
• E) 2.85 years.

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Definitions:

Locus of Control

A psychological concept referring to the degree to which individuals believe they have control over the events affecting their lives.

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A type of personality known for its peaceable, long-suffering, and casual qualities.

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Stress Reaction

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