A Company Is Considering Purchasing a Machine for $21,000

question 32

Multiple Choice

A company is considering purchasing a machine for $21,000. The machine will generate an after-tax net income of $2,000 per year. Annual depreciation expense would be $1,500. What is the payback period for the new machine?

• A) 4 years.
• B) 6 years.
• C) 10.5 years.
• D) 14 years.
• E) 42 years.

Understand the structure and components of the statement of cash flows.

Apply the direct method to prepare a statement of cash flows.

Analyze cash flow from operating activities.

Interpret the cash flow statement to assess the financial health of a corporation.

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Definitions:

Transfer Funds

The act of moving money from one account to another, either within the same financial institution or across different ones.

Right To Remain Silent

A legal principle that allows individuals to not answer questions or provide information that might incriminate themselves during legal proceedings.

Trial By Jury

A legal proceeding in which a group of citizens (the jury) is selected to hear the facts of a case and make a decision based on those facts, under the guidance of a judge.

Question Witnesses

The process of asking witnesses questions in a legal setting, either in court or during depositions, to elicit information or evidence.