Logy Ltd Is Evaluating Two Possible Investments in Depreciable Plant

question 44

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 B.

• A) 3.57 years
• B) 4.43 years
• C) 1.96 years
• D) 3.69 years

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Definitions:

Carbohydrates

Organic compounds made up of carbon, hydrogen, and oxygen atoms that serve as a major energy source for the body.

Behaviorists

Psychologists who focus on observable behavior and the ways in which learning influences behavior, often through the principles of conditioning.

Unconscious Thoughts

Mental processes that occur without an individual's awareness, influencing behaviors and perceptions.

Environment Molds

Influences from an individual's surroundings that shape their behaviors, attitudes, and development.