2 The amount of the average investnent for a propo $300,000 in a plant line meth

Question

2 The amount of the average investnent for a propo $300,000 in a plant line method), with a useful lif and an expected total income yield of $108,000, 1s: t of asset, giving effect to depreciation (straight- e of four years , no residual value, A. $54,000 B. $108,000 C. $150,000 D. $27,000 21 .--The amount of the estimated average income for a proposed investment of $300,000 in a plant asset, giving effect to depreciation (straight-line nethod), with a useful life of four years, no residual value, and an expected total income yield of $108,000, is: A. $54,000 B. $108,000 C. $150,000 D. $27,000 An anticipated purchase of equipment for $1,200,o00, wi life of 8 years and no residual value, is expected to yield the following annual net incomes and net cash flows: th a useful ONet Income ONet Cash Flow Year 1 2 3 4 5 $180,000 150,000 150,000 120,000 120,000 120,000 120,000 120,000 $330,000 300,000 300,000 270,000 270,000 270,000 270,000 270,000 7 8 What is the cash payback period? A. 4 years B. 5 years C. 6 years D. 3 years

Explanation / Answer

Answer to Part 20

Average Investment = ( Initial Investment + Residual value )/2

Here there is no residual value, so average invstment is ($300,000+0)/2= $1,50,000

So the avergae investment is $1,50,000

Answer is Option C

Answer to Part 21

108,000 / 4 = 27,000

d) $27,000

Answer to Part 22

Cash recovered in 4 years = $330000+$300000+$300000+$270000 = $1200000

Option A would be answer

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