Yancy Is Considering a Project Which Will Produce Cash Inflows

question 54

Multiple Choice

Yancy is considering a project which will produce cash inflows of $900 a year for 4 years.The project has a 9% required rate of return and an initial cost of $2,800.What is the discounted payback period?

• A)3.11 years
• B)3.18 years
• C)3.82 years
• D)4.18 years
• E)Never

Apply the completed-contract method for long-term contracts.

Identify conditions that must be met for revenue recognition in the presence of a right of return.

Analyze and account for initial franchise fees revenue.

Recognize revenue correctly in bundled sales transactions.

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Definitions:

Individual Tax Rate

The tax rate applied to an individual's income, which varies depending on income level and filing status, contributing to the progressive taxation system.

Capital Gains

Capital gains are the profit made from the sale of an asset or investment which has increased in value over the holding period.

Current Income

Earnings derived from investments or employment that are received regularly, such as dividends or salaries.

High-Dividend Policy

A corporate strategy focusing on paying out a large portion of its earnings to shareholders in the form of dividends.