Consider an Investment with an Initial Cost of $20,000 That

question 69

Multiple Choice

Consider an investment with an initial cost of $20,000 that expected to last for 5 years.The expected cash flows in Years 1 and 2 are $5,000 each,in Years 3 and 4 are $5,500 each,and the Year 5 cash flow is $1,000.Assume each annual cash flow is spread evenly over its respective year.What is the payback period?

• A)3.18 years
• B)3.82 years
• C)4.00 years
• D)4.55 years
• E)None of these

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Definitions:

Share Losses

The financial reductions in value or earnings experienced by shareholders as a result of a decrease in the price or profitability of the shares.

Partnership Agreement

A contract between partners in a partnership, detailing the terms of the relationship, distribution of profits, and the management of the partnership.

Partnership Losses

Financial setbacks attributed to the operational or investment activities of a partnership that are shared among the partners according to their agreement.

Capital Contributions

Monetary or non-monetary assets provided by an owner or partner to increase the capital of a company or partnership.