MULTIPLE CHOICE QUESTIONS

1. An investment of $6,000 produces a net annual cash inflow of $2,000 for each of 5 years. What is the payback period?

a. 2 years

b. 1.5 years

c. Unacceptable

d. 3 years

e. Cannot be determined

2. An investment of $1,000 produces a net cash inflow of $500 in the first year and $750 in the second year. What is the payback period?

a. 1.67 years

b. 0.50 year

c. 2.00 years

d. 1.20 years

e. Cannot be determined

3. An investment of $2,000 provides an average net income of $400. Depreciation is $40 per year with zero salvage value. The ARR using the original investment is

a. 44%.

b. 22%.

c. 20%.

d. 40%.

e. None of these.