Today, Crunchy Snacks Is Investing $487,000 in a New Oven

question 58

Multiple Choice

Today, Crunchy Snacks is investing $487,000 in a new oven. As a result, the company expects its cash flows to increase by $62,000 a year for the next two years and by $98,000 a year for the following three years. How long must the firm wait until it recovers all of its initial investment?

• A) 3.97 years
• B) 4.18 years
• C) 4.46 years
• D) 4.70 years
• E) The project never pays back.

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Definitions:

Call Options

Call options are financial contracts that give the buyer the right, but not the obligation, to buy a specified amount of an underlying asset, at a set price, within a specified period.

Put Options

Financial contracts giving the owner the right, but not the obligation, to sell a specified amount of an underlying security at a specified price within a specified time frame.

Stock Price

The current price at which a share of a company is bought or sold on the stock market.

Cost Of Goods Sold

The total cost of materials and labor directly associated with the production of goods sold by a business.