If a Project Has an Initial Investment of $20,000 and Consecutive

question 52

Multiple Choice

If a project has an initial investment of $20,000 and consecutive yearly cash inflows of $5,000,$8000,$10,000 and $7,000,respectively,what is its payback period?

• A) 2 years
• B) 2.5 years
• C) 2.7 years
• D) 3 years

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Definitions:

Theory of Absolute Advantage

An economic theory proposed by Adam Smith, which suggests that countries should specialize in the production of goods for which they have an absolute advantage.

Theory of Comparative Advantage

An economic principle stating that countries or entities benefit from specializing in and exporting goods for which they have a lower opportunity cost.

Theory of Economies of Scale

An economic concept that describes how as a firm increases its production scale, the average cost per unit of output decreases, leading to increased efficiency.

International Product Life Cycle

A theory explaining how a product matures and sales change over time on an international scale, impacting production and distribution.