An Investment Project Requires an Initial Investment of $100,000

question 81

Multiple Choice

An investment project requires an initial investment of $100,000. The project is expected to generate net cash inflows of $28,000 per year for the next five years. These cash inflows occur evenly throughout the year. Assuming a 12% discount rate, the project's payback period is (Ignore income taxes.) :

• A) 0.28 years
• B) 3.36 years
• C) 3.57 years
• D) 1.40 years

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Definitions:

Current Ratio

A liquidity ratio that measures a company's ability to pay short-term obligations.

Budget

Company’s plan for how it will raise and spend money during a given period of time.

Asset Turnover Ratio

A financial metric that measures the efficiency of a company at using its assets to generate revenue or sales.

Return On Equity

A financial ratio that measures the amount of net income returned as a percentage of shareholders' equity, indicating the profitability of a company relative to owner's investments.