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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