A Company with $600,000 in Operating Assets Is Considering the Purchase

question 68

Multiple Choice

A company with $600,000 in operating assets is considering the purchase of a machine that costs $72,000 and which is expected to reduce operating costs by $18,000 each year. These reductions in cost occur evenly throughout the year. The payback period for this machine in years is closest to:

• A)4 years
• B)8.3 years
• C)0.25 years
• D)33.3 years

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Definitions:

Financial Resources

Assets and funds available to a person or organization for spending, investing, or other purposes.

Hans Selye

A Hungarian-Canadian endocrinologist known for his research on the physiological effects of stress, termed the "General Adaptation Syndrome."

Alarm Phase

The initial reaction of the body to stress, activating the sympathetic nervous system and the fight or flight response.

Adrenal Cortex

The outer part of the adrenal gland that produces steroid hormones which regulate metabolism and immunity, among other functions.