Cary Swenson Is Considering Investing $30,000 in a Project with the Following

question 1

Multiple Choice

Cary Swenson is considering investing $30,000 in a project with the following cash revenues and expenses:
$\begin{array}{lll}&&\text { Cash Expenses \& }\\&\text { Revenues }&\text { Depreciation }\\\text { Year 1 } & \$ 10,000 & \$ 12,000 \\\text { Year 2 } & \$ 12,000 & \$ 11,000 \\\text { Year 3 } & \$ 15,000 & \$ 12,000 \\\text { Year 4 } & \$ 20,000 & \$ 12,000 \\\text { Year 5 } & \$ 22,000 & \$ 12,000 \\\text { Year 6 } & \$ 25,000 & \$ 15,000 \\\text { Year 7 } & \$ 25,000 & \$ 15,000 \\\text { Year 8 } & \$ 25,000 & \$ 15,000\end{array}$
-Refer to the Figure.Assume a straight-line depreciation over eight years.What would be the payback period for the project?

• A)between 1 and 2 years
• B)between 3 and 4 years
• C)between 4 and 5 years
• D)between 6 and 7 years

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Definitions:

Loan Balance

The remaining amount owed on a loan, not including future interest, at any given time.

Minimum Cash Balance

The lowest amount of cash that a company or individual aims to hold in order to meet short-term obligations.

Cash Budget

A financial plan that estimates cash inflows and outflows over a specific period, helping organizations manage their liquidity and cash reserves.

Management Use

Management use typically refers to information or resources utilized by the management team for decision-making and strategic planning purposes.