11. Multiple Choice 1. Project L required an initial investment of $10,200 with the following annual cash inflows: Year 1 $1,200; Year 2 $3,000; Year 3 $ 2.800; Year 4 $1,300 Year 5 $3,000 and Year 6 $2,100 The project's payback period is: (a) 4.63 years (d) 4.90 years (b) 5.00 years (e) None of the above (c) 4.17 years 2. Gibson's Corporation's labor costs appear below: Direct factory labor $7.00/u Sales commissions 2.00/u Administration $14,000 per month For August, budgeted production was 1,000 units and budgeted sales were 1,200 units. What is Gibson's budgeted factory labor cost for August? (a) $13,500 (d) $11,500 (b) 7,000 (e) None of the above (c) 13,800 3. The profitability index is the ratio of: (a) The net present value of the investment to the initial investment. (b) The present value of cash flows to the initial investment. (c) The internal rate of return to the cost of capital. (d) Total cash flows to the initial investment. (e) None of the above. 4. Which of the following is relevant to a make or buy decision? (a) Sunk costs (d) Allocated fixed costs (b) The split off value (e) None of the above (c) Incremental fixed costs