Logan,IncIs Evaluating Two Possible Investments in Depreciable Plant Assets Calculate the Payback Period for Investment A

question 119

Multiple Choice

Logan,Inc.is evaluating two possible investments in depreciable plant assets.The company uses the straight-line method of depreciation.The following information is available: $$\begin{array} { | l | r | r | } \hline & \text { Investment A } & \text { Investment B } \\\hline \text { Initial capital investment } & \$ 101,000 & \$ 151,000 \\\hline \text { Estimated useful life } & 10 \text { years } & 10 \text { years } \\\hline \text { Estimated residual value } & 0 & \$ 20,000 \\\hline \text { Estimated annual net cash inflow for 10 years } & \$ 28,000 & \$ 47,000 \\\hline \text { Required rate of return } & 12 \% & 12 \% \\\hline\end{array}$$ Calculate the payback period for Investment A.(Round your answer to two decimal places. )

• A)2.22 years
• B)2.89 years
• C)1.00 year
• D)3.61 years

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Definitions:

Sensory

Sensory relates to the senses or sensation, involving the reception and processing of visual, auditory, olfactory, tactile, and taste information.

Trace

To follow, study, or monitor the course or path of something; also pertains to a very small amount or indication of something.

Working

Engaging in physical or mental activity in order to achieve a purpose or result, typically in a job or profession.

Long-Term

Describes something that occurs over an extended period, often many years.