What is the discounted payback period for a business that has an income of $5000

Question

What is the discounted payback period for a business that has an income of $5000 per year and expenses of $1500 per year if your initial investment was $23, 800 and your MARR is 10% per year? A. Less than 6 years B. 8 years C. 12 years D. 17 years Interest formula used: _____ The incremental cash flow between two alternatives is shown below: The equation(s) that can be used to correctly solve for the incremental rate of return, Delta i, is(are): A. -25,000 + 3000(P/A, Delta i, 10) + 400 (P/F, Delta i, 10) = 0 B. -25,000 (A/P, Delta i, 10) + 3000 + 400 (A/F, Delta i, 10) = 0 C. -25,000 (F/P, Delta i, 10) + 3000 (F/A, Delta i, 10) + 400 = 0 D. All of the above For a market interest rate of 16% per year, compounded semiannually; and an inflation rate of 2% per 6 months, the effective semiannual real interest rate is closest to? A. 6% B. 4% C. 3% D. 2% Formula used: _____ A construction equipment costs $40,000 today. If the market interest rate was 15% per year and cost has increased only by the inflation rate of 6% per year, its cost 10 years ago was closest to: A. $71, 600 B. $27, 405 C. $22, 335 D. $17, 700 Formula used: _____ An alternative has the following cash flows: benefits = $60,000 per year; disbenefits = $29,000 per year; amortized initial cost = $25,000 per year; M&O; costs of $15,000 per year. At an interest rate of 10% per cost- year, the modified B/C ratio is closest to: A. 1.04 B. 0.80 C. 0.72 D. 1.04 Formula used: _____

Explanation / Answer

4) Calculate the present value using

Present value = CF/(1+R)n

Put R = 0.06 n= 10 CF = 40000

5) B/C ratio = (Benefits- Disbenefits)/((Initial cost x 0.10) + MO cost) Here 0.10 is 10% interest rate

Substitute the values you will get the answer

Please note that there is some error in 5th question options (A and D are alike)

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