A Company Is Evaluating Three Possible Investments

question 70

Multiple Choice

A company is evaluating three possible investments. Following information is provided by the company. What is the payback period for Project A? (Assume that the company uses the straight-line depreciation method.)

• A)3.0 years
• B)2.0 years
• C)4.0 years
• D)5.0 years

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Definitions:

Economies of Scope

Cost advantages that enterprises obtain through diversification and the production of a variety of goods rather than specializing in a single product.

Multiproduct Firms

Companies that produce and sell more than one product or service, often benefiting from economies of scope.

Technology

Refers to the application of scientific knowledge for practical purposes, especially in industry.

Short-run Average Cost

The total cost divided by the quantity of output produced, in the short term when at least one input is fixed.