Forrest Ltd Is Evaluating an Investment Proposal Using the Payback

question 37

Multiple Choice

Forrest Ltd is evaluating an investment proposal using the payback method. Cash inflows are expected to be $8000 in year 1, $8700 in year 2, $6000 in year 3, and $4800 in year 4. The initial investment required is $18 000. Assuming even cash inflows within each year what is the payback period?

• A) 2.06 years
• B) 3.00 years
• C) 2.22 years
• D) 2.50 years

---

Definitions:

Tropical Grassland

A biome characterized by tall grasses, occasional trees, and a warm climate, receiving more seasonal rainfall than a desert but less than a tropical rainforest.

Very Dry

A condition of extremely low moisture content, often used to describe climates, environments, or substances lacking in water.

Extremes

Conditions or situations that are significantly different from the norm or average, usually at opposite ends of a spectrum.

Heat

The form of energy that is transferred between systems or objects with different temperatures, flowing from high to low.