A Project Costs $475 and Has Cash Flows of $100

question 216

Multiple Choice

A project costs $475 and has cash flows of $100 for the first three years and $75 in each of the project's last five years. What is the payback period of the project?

• A) The project never pays back.
• B) 4.75 years
• C) 5.00 years
• D) 5.33 years
• E) 6.00 years

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Definitions:

Normal Production

Denotes the expected volume of production achieved under standard operating conditions, without unusual increases or decreases.

Materials Price Variance

The difference between the actual cost of materials and the expected cost, indicating how effectively a company is managing its raw material costs.

Accounts Payable

The amount a company owes to its suppliers or creditors for goods or services received that have not yet been paid for.

Work in Process

Products that are in the middle of the production process but are not yet finished.