Logy Inc Is Evaluating Two Possible Investments in Depreciable Plant Assets

question 71

Multiple Choice

Logy Inc. is evaluating two possible investments in depreciable plant assets. The company uses the straight-line method of depreciation. The following information is available: $$\begin{array} { | l | r | r | } \hline & \text { Investment A } & \text { Investment B } \\\hline \text { Initial capital investment } & \$ 100,000 & \$ 150,000 \\\hline \text { Estimated useful life } & 10 \text { years } & 10 \text { years } \\\hline \text { Estimated residual value } & 0 & \$ 20,000 \\\hline \text { Estimated annual net cash inflow for 10 years } & \$ 20,000 & \$ 40,000 \\\hline \text { Required rate of return } & 10 \% & 12 \% \\\hline\end{array}$$ Calculate the payback period for Investment B.

• A) 3 years
• B) 2 years
• C) 4 years
• D) 5 years

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Definitions:

Intention To Treat

Intention To Treat is an approach in clinical trials where all participants are included in the final analysis regardless of whether they completed the study as per the protocol.

Randomly Selected

Chosen without a specific pattern, order, or method, ensuring each item has an equal chance of being selected.

Causation

A relationship between two events where one directly affects or brings about the change in the other.

Correlation

A measure of the relationship between two or more variables, indicating how one may predict or relate to the other.