Gateway Graphics Is Considering an Investment in New Printing Equipment

question 17

Multiple Choice

Gateway Graphics is considering an investment in new printing equipment costing $502,000.The equipment will be depreciated on a straight-line basis over a five-year life and is expected to generate net cash inflows of $122,000 the first year,$158,000 the second year,and $160,000 every year thereafter until the fifth year.What is the payback period for this investment? The residual value is zero.(Round your answer to two decimal places.)

• A) 4.30 years
• B) 3.39 years
• C) 2.80 years
• D) 3.11 years

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Definitions:

Totten Trust

A form of revocable trust created during the trustee's lifetime where the funds in a bank account are payable on the trustee's death to a named beneficiary.

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A will entirely handwritten and signed by the testator.

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A bank deposit involves placing money into a banking institution for safekeeping, with the funds typically available for withdrawal at a later date.

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A connection between entities or individuals that is recognized and governed by law, such as contracts, familial ties, or partnerships.