Annmarie Is Considering a Project Which Will Produce Cash Inflows

question 23

Multiple Choice

Annmarie is considering a project which will produce cash inflows of $1,200 a year for 6 years. The project has a 15 percent required rate of return and an initial cost of $3,400. What is the discounted
Payback period?

• A) 2.83 years
• B) 2.92 years
• C) 3.96 years
• D) 3.99 years
• E) 4.13 years

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Definitions:

Magnuson-Moss Act

A federal statute enacted to protect consumers from deceptive warranty practices, providing guidelines for product warranties.

Full Warranty

A comprehensive guarantee that covers the repair or replacement of defective products or parts with minimal conditions for a specified period.

Limited Warranty

A warranty with specific conditions and limitations on what is covered, the duration of coverage, and what will be done to correct issues.

Implied Warranty

A legal assurance inherent in a transaction that the goods or services sold meet certain quality standards, even if not explicitly stated.