Better Buy Has Six CD Players in Inventory on December

question 90

Multiple Choice

Better Buy has six CD players in inventory on December 31.The players were purchased in November for $170.Price lists from Better Buy's supplier indicate that the same CD player would now cost the company $168.The current sales price for each of the CD players is $320.The adjustment would have what effect on Gross profit?

• A) Gross Profit would increase by $2.
• B) Gross Profit would not be affected.
• C) Gross Profit would decrease by $12.
• D) Gross Profit would increase by $12.

---

Definitions:

Payback Period Method

A capital budgeting method that calculates the time required for an investment to generate cash flows to recover its initial cost.

Net Present Value

A method used in capital budgeting to evaluate the profitability of an investment by calculating the difference between the present value of cash inflows and outflows over a period of time.

Internal Rate of Return

A metric used in financial analysis to estimate the profitability of potential investments.

Time Value of Money

The concept that money available today is worth more than the same amount in the future due to its potential earning capacity.