-Under the Payback Period and Assuming These Machines Are Mutually

question 50

Multiple Choice

$\begin{array}{lrrr} &\text { Machine A } & \text { Machine B } & \text { Machine-C } \\&(\$ 20,000) & (\$ 30,000) & (\$ 40,000) \\& \text { Inflows } & \text { Inflows } & \text { Inflows } \\\text { year 1 } & \$ 10,000 & \$ 12,000 & \$-0- \\\text { year 2 } & 10,000 & 12,000 & 10,000 \\\text { year 3 } & 5,000 & 10,500 & 30,000 \\\text { year 4 } & 2,000 & 10,500 & 15,000 \\\text { year 5 } & -0- & -0- & 15,000\end{array}$
-Under the payback period and assuming these machines are mutually exclusive,which machine(s) would Horne Robinson Inc.choose?

• A) Machine A
• B) Machine B
• C) Machine C
• D) Machine A and B

---

Definitions:

Internal Rate of Return Method

A capital budgeting method used to estimate the profitability of potential investments.

Payback Period

The time it takes for an investment to generate enough revenue to recover the original cost.

Annuity

An investment product offering a regular payout to a beneficiary, commonly employed to generate a steady income for those who are retired.

Net Cash Inflow

The difference between all cash receipts and all cash payments over a period of time, showing the net increase or decrease in cash.