(Ignore Income Taxes in This Problem $\begin{array}{lrr} \text {Years 1-10 } &£ 85,000\\ \text {Years 11 } &£(20,000)\\ \text { Years 12} &£ 95,000\\\end{array}$

question 29

Multiple Choice

(Ignore income taxes in this problem.) Murdock Company has a chance to make and sell a new plastic five-gallon container. The company estimates that the net cash flows (sales less cash operating expenses) arising from manufacture and sale of the new container would be as follows (numbers in parentheses indicate an outflow) : $\begin{array}{lrr} \text {Years 1-10 } &£ 85,000\\ \text {Years 11 } &£(20,000) \\ \text { Years 12} &£ 95,000\\\end{array}$

-Murdock would need to purchase production equipment costing £200,000 now to use in the manufacture of the new containers. This equipment would have a 12-year life and a £20,000 salvage value. Murdock Company's required rate of return is 12%. The payback period on this investment is (rounded to the nearest tenth of a year)

• A)2.0 years.
• B)2.4 years.
• C)3.0 years.
• D)3.4 years.

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Definitions:

Middle

Being at a point or position equally distant from the sides, edges, or ends; centrally located.

Abnormal

Deviating from what is normal or usual, typically in a way that is undesirable or worrying.

Prefix

A morpheme added at the beginning of a word to adjust or qualify its meaning.

Combining Vowel

A vowel, often 'o' or 'i', used in medical terminology to ease the pronunciation between the word root and the suffix or between two word roots.