The Calculation of the Payback Period for an Investment When

question 26

Multiple Choice

The calculation of the payback period for an investment when net cash flow is even (equal) is:

• A) Cost of investment/Annual net cash flow
• B) Cost of investment/Total net cash flow
• C) Annual net cash flow/Cost of investment
• D) Total net cash flow/Cost of investment
• E) Total net cash flow/Annual net cash flow

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Definitions:

Variable Costs

Costs that change in proportion to the activity of a business.

Property Taxes

Taxes levied by local governments based on the assessed value of property, including land and buildings owned.

Contribution Margin

The amount remaining from sales revenue after variable expenses have been deducted, indicating how much contributes to covering the fixed costs.

Break-even Sales

The amount of revenue needed to cover both fixed and variable costs, resulting in no profit or loss.