An uncovered cost at start of year is $200, full cash flow during recovery year is $400 and prior years to full recovery is 3 then payback would be ________?
Correct answer: B. 3.5 years
- A. 5 years
- B. 3.5 years
- C. 4 years
- D. 4.5 years
Explanation
Payback is calculated as three completed years plus the unrecovered fraction of the fourth year: $200 divided by $400 equals 0.5 year. Therefore, the total payback period is 3.5 years.
Report an error
The more specific you are, the faster it gets fixed. A source beats an opinion.
Prefer email? support@testustad.com
About Business Finance
Business finance explains how organisations plan, obtain and use money while balancing risk, return and liquidity. Topics include financial statements, time value of money, budgeting, working capital, capital structure, sources of finance, investment appraisal and cost of capital. Capital budgeting evaluates long-term projects, whereas working capital manages day-to-day operations.
Practise Business Finance
975 free Business Finance MCQs from Management Sciences, each with the correct answer and an explanation. Unlimited attempts, no account needed.
Exams that ask Management Sciences questions like this
Management Sciences is on 2 papers prepared for on TestUstad, and all of them draw the same bank, so this question is worth knowing for every one of them.
More Business Finance questions
In capital budgeting, the positive net present value results in _________?
An uncovered cost at the start of year is divided by full cash flow during recovery year then added in prior years to full recovery for calculating ____________?
In cash flow analysis, the two projects are compared by using common life, is classified as _________?
The relationship between Economic Value Added (EVA) and the Net Present Value (NPV) is considered as _________?
In the mutually exclusive projects, the project which is selected for comparison with others must have _________?
A project whose cash flows are more than the capital invested for rate of return then the net present value will be _________?