O'Mally Department Stores Is Considering Two Possible Expansion Plans

question 191

Multiple Choice

O'Mally Department Stores is considering two possible expansion plans.One proposal involves opening 5 stores in Indiana at the cost of $1,920,000.Under the other proposal,the company would focus on Kentucky and open 6 stores at a cost of $2,500,000.The following information is available:

The payback period for the Kentucky proposal is closest to

• A)4.5 years.
• B)6.25 years.
• C)5.00 years.
• D)31.25 years.

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Definitions:

Legal Life

The period in which an asset is legally allowed to be used for its intended purpose, or the duration of intellectual property protection under law.

Useful Life

The estimated period over which a fixed asset is expected to be usable by an organization.

Accumulated Depreciation

The aggregate sum of depreciation costs accounted for a fixed asset since its inception of use.

Equipment Account

A financial account that tracks the acquisition cost and depreciation of a company's equipment.