A Company Is Evaluating 3 Possible Investments -
What Is the Payback Period for Project B?
A)

question 45

Multiple Choice

A company is evaluating 3 possible investments. Each uses straight-line depreciation. See data below:
$\begin{array}{|c|c|c|c|}\hline & \text { Project A } & \text { Project B } & \text { Project C } \\\hline \text { Investment } & \$ 400,000 & \$ 20,000 & \$ 100,000 \\\hline \text { Salvage value } & \$ 0 & \$ 2,000 & \$ 5,000 \\\hline\\\hline \text { Net cash flows: } & & & \\\hline \text { Year 1 } & \$ 100,000 & \$ 10,000 & \$ 40,000 \\\hline \text { Year 2 } & \$ 100,000 & \$ 8,000 & \$ 25,000 \\\hline \text { Year 3 } & \$ 100,000 & \$ 5,000 & \$ 30,000 \\\hline \text { Year 4 } & \$ 100,000 & \$ 3,000 & \$ 10,000 \\\hline \text { Year 5 } & \$ 100,00 & \$ 0 & \$ 0 \\\hline\end{array}$

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What is the payback period for Project B?

• A) 3.5 years
• B) 2.5 years
• C) 2.4 years
• D) 3.0 years

Understand the impact of standard cost variances on Cost of Goods Sold.

Calculate net operating income under a standard cost system.

Comprehend the purchase and usage process of raw materials in manufacturing.

Understand how to apply fixed and variable costs to the work in process inventory.

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Definitions:

Epoxy

A class of synthetic thermosetting polymers used in adhesives, coatings, and composite materials, known for strong adhesive and mechanical properties.

Thermoplastic

A type of plastic material that becomes moldable at a certain elevated temperature and solidifies upon cooling.

Round

A geometric shape without corners, typically circular in nature.

Curved Edge

An edge that is not straight, but has a continuous smooth bend or arc.