Phoxco Is Considering Automating Its Production Line

question 13

Multiple Choice

Phoxco is considering automating its production line. It will cost $40,000 to acquire the necessary equipment. The annual cost savings are expected to be $8,000 per year for 14 years.. The firm requires a 20% return.
Ignoring income taxes, what is the payback period?

• A) 3 years
• B) 4.2 years
• C) 5 years
• D) 6 years

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