Boyle Company Is Evaluating Two Possible Investments in Depreciable Plant

question 117

Multiple Choice

Boyle Company is evaluating two possible investments in depreciable plant assets.The company uses the straight-line method of depreciation.The following information is available: $$\begin{array} { | l | r | r | } \hline & \text { Investment A } & \text { Investment B } \\\hline \text { Initial capital investment } & \$ 100,000 & \$ 150,000 \\\hline \text { Estinated useful life } & 3 \text { years } & \text { 3 years } \\\hline \text { Estimated residual value } & \$ 10,000 & \$ 15,000 \\\hline \begin{array} { l } \text { Estimated annual get cash inflow } \\\text { Far 3 years }\end{array} & \$ 25,000 & \$ 40,000 \\\hline \text { Required rate of return } & 10 \% & 12 \% \\\hline\end{array}$$ The present value factors of $1 due 3 years from now:
$\begin{array} { | c | c | } \hline 8 \% & 0.794 \\\hline 10 \% & 0.751 \\\hline 12 \% & 0.712 \\\hline 14 \% & 0.675 \\\hline 16 \% & 0.641 \\\hline\end{array}$
The annuity present value factors of $1 due at the end of each of 3 years:
$\begin{array} { | c | c | } \hline 8 \% & 2.577 \\\hline 10 \% & 2.487 \\\hline 12 \% & 2.402 \\\hline 14 \% & 2.322 \\\hline 16 \% & 2.246 \\\hline\end{array}$
- How long is the payback period for Investment B?

• A)2.40 years
• B)3.38 years
• C)3.75 years
• D)10.00 years

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Definitions:

Explicit Memory

The type of memory involving conscious recall of factual information, experiences, and concepts.

Declarative Memory

The aspect of human memory that involves the ability to recall factual information, such as names, dates, and concepts.

Consolidation

The process of stabilizing a memory trace after the initial acquisition, making it more durable and long-lasting.

Long-term Memory

The phase of the memory process that involves the storage of information over extended periods, potentially for a lifetime.