GuSont Inc Assume That Cash Inflows Occur Evenly Throughout the Year

question 38

Multiple Choice

GuSont Inc. was considering an investment in the following project: $\begin{array}{lrr}\text { Required initial investment } & \$ 990,000 \\\text { Net annual after-tax cash inflow } & \$ 165,000 \\\text { Annual depreciation expense }(\$ 990,000-\$ 165,000) / 15 \text { years } & \$ 55,000 \\\text { Estimated salvage value } & \$ 165,000 \\\text { Life of the project in years } & 15\end{array}$ Assume that cash inflows occur evenly throughout the year. The estimated payback period in years (rounded to one decimal place) for the proposed project is:

• A) 3.7 years.
• B) 4.6 years.
• C) 5.8 years.
• D) 6.0 years.
• E) 7.9 years.

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Definitions:

Decision Tree Analysis

A graphical tool that helps in making decisions by mapping out different courses of action and their possible outcomes.

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Choices available to decision-makers in a given decision-making scenario.

Decision Trees

A graphical representation used for decision-making, showing various outcomes from a series of related choices, helping to weigh options and possible consequences.

Decision Tables

A tool used in both computer programming and business decision-making that represents the logic of decision making through a matrix of conditions and the actions to be taken.