Ribelin Corporation Is Adding a New Product Line That Will

question 188

Multiple Choice

Ribelin Corporation is adding a new product line that will require an investment of $138,000.The product line is estimated to generate cash inflows of $25,000 the first year,$23,000 the second year,and $18,000 each year thereafter for ten more years.What is the payback period?

• A)7.26 years
• B)5.52 years
• C)7.00 years
• D)7.67 years

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Definitions:

Fair Value Adjustment

An accounting process of updating the book value of an asset or liability to reflect its current market value.

Joint Venture

A business arrangement in which two or more parties agree to pool their resources for the purpose of accomplishing a specific task or project.

Cost Method

A method of accounting that records the investment at its original cost and recognizes income when dividends are received.

Equity Method

An accounting technique used to record investments in which the investor has significant influence over the investee but does not control it outright.