Which of the following equipment purchased by a company has the greatest payback period?
A) A boiler that costs $20,000 with the potential to save $200 a year
B) A truck that costs $40,000 with the potential to save $2,000 a year
C) A stove that costs $1,000 with the potential to save $200 a year
D) A computer system that costs $55,000 with the potential to save $5,000 a year

Question

Quizplus · Accepted Answer

The payback period can be calculated by dividing the cost of the equipment by the annual savings. 
A) Payback period = 20,000 / 200 = 100 years
B) Payback period = 40,000 / 2,000 = 20 years
C) Payback period = 1,000 / 200 = 5 years
D) Payback period = 55,000 / 5,000 = 11 years

Therefore, option A has the greatest payback period and is not a good investment for the company. Options B, C, and D have shorter payback periods and offer better potential returns on investment.

Which of the Following Equipment Purchased by a Company Has