The Halsey Corporation Is Contemplating the Purchase of New Equipment

Multiple Choice

The Halsey Corporation is contemplating the purchase of new equipment that would require an initial investment of $125,000. The equipment would have a useful life of six years, with a salvage value of $29,000. This new equipment would be depreciated over its useful life by the straight-line method. It would replace existing equipment which is fully depreciated. The existing equipment has a salvage value now of $38,000. The anticipated annual revenues and expenses associated with the new equipment are: Assume cash flows occur uniformly throughout a year except for the initial investment and the salvage value at the end of the project. The payback period is closest to:

A) 5.7 years
B) 4.0 years
C) 2.3 years
D) 1.8 years