Ataxia Fitness Center is considering an investment in some additional weight training equipment. The equipment has...

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

Solutions

Expert Solution

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

ekkarill92 answered 2 years ago

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