A Firm Is Evaluating a Proposal Which Has an Initial

question 3

Multiple Choice

A firm is evaluating a proposal which has an initial investment of €35,000 and has cash flows of €10,000 in year 1, €20,000 in year 2, and €10,000 in year 3. The payback period of the project is

• A) between two and three years.
• B) one year.
• C) two years.
• D) between one and two years.

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Definitions:

Cost of Goods Sold

Directly incurred costs associated with the production of a company’s goods for sale, comprising material and labor expenses.

FOB Shipping Point

A term used in shipping contracts to indicate that the buyer is responsible for the goods and the shipping cost from the moment the goods leave the seller's premises.

Perpetual Inventory System

This method for accounting inventory immediately notes down any purchase or sale through the use of computerized point-of-sale systems and enterprise asset management software.

FOB Shipping Point

A term indicating that the buyer assumes ownership and responsibility for goods at the seller's location, and pays for shipping costs.