ABC Company Is Adding a New Product Line That Will

question 22

Multiple Choice

ABC Company is adding a new product line that will require an investment of $1 500 000. The product line is estimated to generate cash inflows of $300 000 the first year, $250 000 the second year, and $200 000 each year thereafter for ten more years. What is the payback period?

• A)6.00 years
• B)2.73 years
• C)7.25 years
• D)6.75 years

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Definitions:

Patient-visits

A measure used in healthcare to quantify the number of visits or interactions patients have with healthcare providers.

Customers Served

The number or segment of clients who receive services or purchase products from a business within a given time frame.

Revenue

The total amount of money received by a company for goods sold or services provided during a specific period.

Flexible Budget

A budget designed to adapt to changes in activity or volume levels, ensuring more accurate budgeting and variance assessments.