Asked by Yanique Dayle on Jul 11, 2024
Verified
(Ignore income taxes in this problem.) Given the following data: 
The life of the equipment must be:
A) it is impossible to determine from the data given
B) 5 years
C) 6 years
D) 7 years
Equipment Life
The expected operational lifespan of machinery or equipment, often used for depreciating or amortizing the cost over its useful life.
Income Taxes
Taxes imposed by the government on the income generated by individuals or entities within a fiscal year.
- Identify and apply the profitability index to rank investment projects.
Verified Answer
JY
Jessica YilmazJul 11, 2024
Final Answer :
D
Explanation :
Factor of the internal rate of return = Investment required ÷ Annual net cash inflow
= $48,680 ÷ $10,000 = 4.868
Looking down the 10% column on the table for the Present Value of an Annuity, 4.868 is the present value of a 7 year annuity.Therefore, the life of the equipment must be 7 years.
= $48,680 ÷ $10,000 = 4.868
Looking down the 10% column on the table for the Present Value of an Annuity, 4.868 is the present value of a 7 year annuity.Therefore, the life of the equipment must be 7 years.
Learning Objectives
- Identify and apply the profitability index to rank investment projects.
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