question archive Alpha Electric Alpha Electric is considering the purchase of testing equipment that will cost $750,000 to replace old equipment
Alpha Electric Alpha Electric is considering the purchase of testing equipment that will cost $750,000 to replace old equipment
Subject:FinancePrice: Bought3
Alpha Electric
Alpha Electric is considering the purchase of testing equipment that will cost $750,000 to replace old equipment. Assume the new machine will generate after-tax savings of $300,000 per year over the next four years.
1. Refer to Alpha Electric. What’s the payback period for the investment?
|
a. |
1.8 years |
|
b. |
2.0 years |
|
c. |
2.5 years |
|
d. |
2.8 years |
2. Refer to Alpha Electric. If the firm has a 15% cost of capital, what’s the discount payback period of the investment?
|
a. |
1.5 years |
|
b. |
3.4 years |
|
c. |
3.0 years |
|
d. |
2.6 years |
