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Ataxia Fitness Center is considering an investment in some additional weight training equipment. The equipment has an estimated useful life of 9 years with no salvage value at the end of the 9 years....

Ataxia Fitness Center is considering an investment in some additional weight training equipment. The equipment has an estimated useful life of 9 years with no salvage value at the end of the 9 years. Ataxia's internal rate of return on this equipment is 8%. Ataxia's discount rate is also 8%. 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.

Multiple Choice

  • 6.25 years

  • 4.50 years

  • 7.35 years

  • 9 years

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Answer #1

Answer: 6.25 Years

IRR Factor at 8% for 9 Years = 6.24689 = 6.25 Years

IRR Factor = Investmnet / annula Cash Flows

Payback period=Invest / annula Cash Glows

IRR Factor = Payback period.

Note : For Any Further Clarification Plases Use the Comment Box.Thank You Very much

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