A Company Is Considering Purchasing a Machine for $21,000

question 32

Multiple Choice

A company is considering purchasing a machine for $21,000. The machine will generate an after-tax net income of $2,000 per year. Annual depreciation expense would be $1,500. What is the payback period for the new machine?

• A) 4 years.
• B) 6 years.
• C) 10.5 years.
• D) 14 years.
• E) 42 years.

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Definitions:

FedEx

An American multinational delivery services company known for its overnight shipping service and pioneering a system that could track packages and provide real-time updates on package location.

Package Tracking

A service provided by postal and courier companies that allows customers to follow the geographic location and status of their shipped items through a unique tracking number.

Short Run

A time period in economic theory during which some factors of production are fixed, affecting the decision-making process of businesses.

Long Run

A period of time in which all factors of production and costs can be fully adjusted, unlike the short run where some factors are fixed.