Bluefield Inc

question 72

Multiple Choice

Bluefield Inc. is considering a project that will require an initial investment of $75,000 and is expected to generate future cash flows of $15,000 for years 1 through 3 and $10,000 for years 4 through 8. The project's payback period is:

• A) 6 years.
• B) 5 years.
• C) 4 years.
• D) 2.67 years.

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Definitions:

Dividends

A distribution of a portion of a company's earnings to its shareholders, usually determined by the board of directors.

Operating Activities

Cash flows directly related to the production and delivery of a company's goods and services.

Direct Method

A method of reporting the cash flows from operating activities as the difference between the operating cash receipts and the operating cash payments.

Indirect Method

A method of reporting the cash flows from operating activities as the net income from operations adjusted for all deferrals of past cash receipts and payments and all accruals of expected future cash receipts and payments.