A Company Is Evaluating Three Possible Investments What Is the Payback Period for Project A? (Assume That

question 100

Multiple Choice

A company is evaluating three possible investments.The following information is provided by the company: $$\begin{array} { | l | r | r | r | } \hline & \text { Project A } & \text { Project B } & \text { Project C } \\\hline \text { Investment } & \$ 240,000 & \$ 54,000 & \$ 240,000 \\\hline \text { Residual value } & 0 & 18,000 & 38,000 \\\hline \text { Net cash inflows: } & & & \\\hline \text { Year 1 } & 62,000 & 34,000 & 98,000 \\\hline \text { Year 2 } & 62,000 & 25,000 & 68,000 \\\hline \text { Year 3 } & 62,000 & 21,000 & 78,000 \\\hline \text { Year 4 } & 62,000 & 18,000 & 38,000 \\\hline \text { Year 5 } & 62,000 & 0 & 0 \\\hline\end{array}$$ What is the payback period for Project A? (Assume that the company uses the straight-line depreciation method.) (Round your answer to two decimal places.)

• A) 2.87 years
• B) 1.59 years
• C) 3.87 years
• D) 5.00 years

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Definitions:

Past Customers

Individuals or entities that have previously purchased goods or services from a business.

Remote Island

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Fishing Resort

A vacation destination offering lodging and access to activities centered around fishing, including guided fishing trips and equipment rental.

Evaluative Criteria

The standards and specifications that consumers use to compare different products and brands when making purchasing decisions.