Paramount Company Is Considering Purchasing New Equipment Costing $708,000 Residual Value Is Zero

question 9

Multiple Choice

Paramount Company is considering purchasing new equipment costing $708,000.The company's management has estimated that the equipment will generate cash flows as follows:
$$\begin{array} { | r|r | } \hline \text { Year } 1 &\$ 202,000 \\\hline 2&202,000 \\\hline 3&254,000 \\\hline 4&254,000 \\\hline 5&150,000 \\\hline\end{array}$$
Residual value is zero.What is the payback period?

• A) 3.5 years
• B) 4.5 years
• C) 3.2 years
• D) 3.7 years

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