[The Following Information Applies to the Questions Displayed Below

question 40

Multiple Choice

[The following information applies to the questions displayed below.]
Lazar Corporation is evaluating a proposal to invest in a machine costing $89,000.The machine has an estimated useful life of ten years,and an estimated salvage value of $14,000.The machine will increase the company's net income by approximately $9,600 per year.All revenue and expenses other than depreciation will be received and paid in cash.
-The payback period of the machine is approximately:

• A)Four years.
• B)Eight years.
• C)Five years.
• D)Ten years.

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Definitions:

Delta

A measure in financial markets that compares the change in the price of a derivative to the change in the price of its underlying asset.

Gamma

A measure of the rate of change in an option's delta for a one-unit change in the price of the underlying asset.

Theta

An option Greek that measures the rate of decline in the value of an option due to the passage of time.

Binomial Model

A financial model used to price options by considering two potential outcomes (up or down) over time for the underlying asset.