Joanne,Inc Calculate the Payback Period for Investment B

question 50

Multiple Choice

Joanne,Inc.is evaluating two possible investments in depreciable plant assets.The company uses the straight-line method of depreciation.The following information is available: $$\begin{array} { | l | r | r | } \hline & \text { Investment A } & \text { Investment B } \\\hline \text { Initial capital investment } & \$ 107,000 & \$ 159,000 \\\hline \text { Estimated useful life } & 10 \text { years } & 10 \text { years } \\\hline \text { Estimated residual value } & 0 & \$ 26,000 \\\hline \text { Estimated annual net cash inflow for 10 years } & \$ 28,000 & \$ 46,000 \\\hline \text { Required rate of return } & 10 \% & 14 \% \\\hline\end{array}$$ Calculate the payback period for Investment B.(Round your answer to two decimal places. )

• A)3.46 years
• B)1.94 years
• C)2.89 years
• D)3.82 years

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Definitions:

Demand Curve

A graphical representation that shows the relationship between the price of a good and the quantity demanded by consumers.

Equilibrium Price

The price in the market where the amount of a product that consumers want to buy is the same as the amount available for sale, resulting in a balanced market situation.

Demand Schedules

Tabular representations showing the quantity of a good or service that consumers are willing and able to buy at various prices, over a specified period.

Surplus

In economics, the amount by which the quantity of a product exceeds the quantity demanded at a specific price.