Equipment a Costing $100,000 Is Expected to Generate $15,000 Annually

question 36

Multiple Choice

Equipment A costing $100,000 is expected to generate $15,000 annually in cash inflows during its life of 7 years.Equipment B costing $150,000 is expected to generate $22,000 annually in cash inflows during its life of 8 years.Equipment C costing $80,000 is expected to generate $16,000 annually in cash inflows during its life of 6 years Rank the three investments in terms of payback period.

• A)A1,B2,C3
• B)B1,A2,C3
• C)C1,A2,B3
• D)C1,B2,A3

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Definitions:

Quota Rent

The earnings that accrue to license holders in a system where import quantity is limited by quotas; it represents the difference between domestic prices and world prices due to restricted supply.

Government Imposes

The act of the government enacting regulations, taxes, restrictions, or laws that directly affect business practices, individual behavior, or market operations.

Shrimp Market

A specialized market segment dealing with the buying and selling of shrimp for consumption.

Price Floor

A government or regulatory imposed minimum price for a good or service, aimed to prevent the market price from falling below a certain level.