The Management of Zesty Corporation Is Considering the Purchase of a New

question 6

Multiple Choice

The management of Zesty Corporation is considering the purchase of a new machine costing $400,000. The company's desired rate of return is 10%. The present value factors for $1 at compound interest of 10% for 1 through 5 years are 0.909, 0.826, 0.751, 0.683, and 0.621, respectively. In addition to the foregoing information, use the following data in determining the acceptability in this situation: The cash payback period for this investment is:

• A) 5 years
• B) 4 years
• C) 2 years
• D) 3 years

---

Definitions:

Risk-Free Rate

The risk-free rate is the theoretical return on an investment with zero risk, serving as a benchmark for measuring investment performance.