Reference: 10-12 Hanley Company Purchased a Machine for $125,000 That Will Be

Reference: 10-12
Hanley Company purchased a machine for $125,000 that will be depreciated on the straight-line basis over a five-year period with no salvage value. The related cash flow from operations is expected to be $45,000 a year. These cash flows from operations occur uniformly throughout the year.
-Buy-Rite Pharmacy has purchased a small auto for delivering prescriptions. was purchased for $9,000 and will have a 6-year useful life and a $3,000 salvage value. should increase gross revenues by at least $5,000 per year. The cost of these prescriptions to the pharmacy will be about $2,000 per year. The pharmacy depreciates all assets using the straight-line method. The payback period for the auto is:

A) 1.8 years.
B) 3.0 years.
C) 2.0 years.
D) 1.2 years.

Correct Answer:

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