A Project Has an Initial Cost of $6,900

question 39

Multiple Choice

A project has an initial cost of $6,900. The cash inflows are $850, $2,400, $3,100, and $4,100 over the next four years, respectively. What is the payback period?

• A) 3.73 years 
• B) 2.51 years
• C) 3.13 years 
• D) 3.51 years
• E) 3.94 years

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Definitions:

Returns to Scale

The change in output resulting from a proportional change in all inputs (factors of production) in the long run.

Inputs

Resources such as labor, materials, and capital that are used in the production process to create goods or services.

Output

The total amount of goods or services produced by a firm, industry, or economy over a certain period of time.

Isoquant

A curve that represents all the combinations of inputs that produce the same level of output in the production process.