Equipment a Costing $64 000 Is Expected to Generate $12

question 64

Multiple Choice

Equipment A costing $64 000 is expected to generate $12 000 annually in cash inflows during its life of 10 years. Equipment B costing $130 000 is expected to generate $18 000 annually in cash inflows during its life of 7 years. Equipment C costing $90 000 is expected to generate $13 000 annually in cash inflows during its life of 9 years. Rank the three investments from best to worst (1 to 3) in terms of payback period.

• A) B=1, C=2, A=3
• B) C=1, A=2, B=3
• C) A=1, C=2, B=3
• D) A=1, B=2, C=3

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Definitions:

Reflex

An automatic and involuntary response to a specific stimulus without conscious thought.

Sensory Stimulus

Any object or event that is perceived by the senses, producing a response in the sensory organs and nervous system.

Zygote

The initial cell formed when two gamete cells are joined by means of sexual reproduction, marking the beginning of a new organism's development.

Fertilized Egg

A cell that results from the union of a sperm cell with an egg cell, marking the beginning of a new organism's development.