Question

Ataxia Fitness Center is considering an investment in some additional weight training equipment. The equipment has an estimated useful life of 5 years with no salvage value at the end of the 5 years. Ataxia's internal rate of return on this equipment is 5%. Ataxia's discount rate is also 5%. The payback period on this equipment is closest to (Ignore income taxes.):

Click here to view Exhibit 13B-1 and Exhibit 13B-2, to determine the appropriate discount factor(s) using the tables provided.

Garrison_16e_Rechecks_2019_10_12

Multiple Choice

• 5.000 years

• 4.329 years

• 2.500 years

• 5.429 years

Answer 1

Answer is 4.329 years

PVAF (5%, 5 years)	Calculation
0.95	(1/ 1.05)
0.91	(1/1.05 ^2)
0.86	(1/1.05 ^3)
0.82	(1/1.05 ^4)
0.78	(1/1.05 ^5)
4.329