A company with $800,000 in operating assets is considering the purchase of a machine that costs $75,000 and which is expected to reduce operating costs by $20,000 each year. The payback period for this machine in years is closest to:

A) 40 years.
B) 10.7 years.
C) 0.27 years.
D) 3.75 years.

Operating Assets

Assets that are used in the day-to-day operations of a business, such as machinery, buildings, and equipment.

Discount Rate

The interest rate used in discounted cash flow analysis to determine the present value of future cash flows, reflecting the time value of money and risk of the investment.

Working Capital

The amount of available capital that a company has to run its day-to-day operations, calculated as current assets minus current liabilities.