Logy Ltd Is Evaluating Two Possible Investments in Depreciable Plant

question 54

Multiple Choice

Logy Ltd is evaluating two possible investments in depreciable plant assets.The company uses the straight-line method of depreciation.The following information is available:
$\begin{array}{|l|c|c|}\hline & \text { Investment A } & \text { Investment B } \\\hline \text { Initial capital investment } & \$ 104,000 & \$ 156,000 \\\hline \text { Estimated useful life } & 10 \text { years } & 10 \text { years } \\\hline \text { Estimated residual value } & 0& \$ 30,000 \\\hline \text { Eistimated anunual net cash inflow for } 10 \text { years } & \$ 23,000 & \$ 46,000 \\\hline\text { Required rate of return }&12\%&12\%\\\hline\end{array}$

Calculate the payback period for Investment A.

• A) 2.58 years
• B) 4.52 years
• C) 1 year
• D) 3.22 years

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Definitions:

Disposition-based Trust

The tendency to rely on others based on one's general propensity to trust, rather than on specific information about the individual.

Psychological Contract

The unwritten set of expectations and obligations between employees and employers regarding the nature of their working relationship.

Negotiation Process

The series of actions taken to reach an agreement or solve a problem through discussion between parties.

Ground Rules

Agreed-upon guidelines or principles set by a group to govern individual behavior and group interactions during meetings or collaborative efforts.