All categories

3 years ago

A disadvantage of using the payback period to compare investment alternatives is that:

Business

1 answer:

Murljashka [212]3 years ago

3 0

Answer: Option a

Explanation: Payback period in capital budgeting comes from a time needed to recover or exceed the break-even point of the funds spent on a project. Moreover, the payback period does not take into account the time value of money.

It is based on the number of years it would take for the funds spent to be recovered. Thus, payback period only evaluates a project on the basis of time period it takes to recover back the investment this results in ignorance of cash flows, which might be huge in amount, that results after the pay back period.

You might be interested in

Why are differentiation and low cost leadership strategies referred to as generic business strategies? they can be simultaneousl

kumpel [21]

Differentiation and low cost leadership strategies are referred to as generic business strategies due to the fact that they can be used in basically any organization, regardless of the industry.

7 0

4 years ago

Consider the following information for Maynor Company, which uses a periodic inventory system:

katrin [286]

Answer:

A. FIFO - 78 units and $7,770 and Cost of Goods Sold $12,738

B. LIFO - Inventory Valuation $7,312 and Cost of Goods Sold $13,196

C. Weighted Average - inventory Valuation $7,304 and Cost of Goods Sold $13,204

Explanation:

Detailed calculation as under:

A. FIFO

First 73 Units are sold from the inventory on May 1. Therefore, we first take the beginning inventory units and then we take the next in line purchases made during the period. In this case the first 34 units are completely taken and then out of the 44 units only 39 units are taken.

Next 68 units are sold from the inventory on October 28. Now we will take the remainder 5 units bought on March 28 (which are not yet sold). Then we take 63 units out of the 68 units purchased on August 22.

The company's ending inventory on FIFO Basis is remaining 5 units bought on 22 August and 73 units bought on 14 October. There total value is (5 x 94) + (73 x 100) = $7,770

Cost of Goods Sold = Total Goods Cost available for sale - Inventory ending valuation

$12,738 = $20,508 - $7,770

B. LIFO

First 73 Units are sold from the inventory on May 1. Therefore, we first take the units purchased on 28 March and then we take the beginning inventory. In this case the first 44 units are completely taken and then out of the 34 units only 29 units are taken.

Next 68 units are sold from the inventory on October 28. Now we will take the units bought on 14 October i.e. 68 units out of the 73 units bought.

The company's ending inventory on LIFO Basis is remaining 5 units in the beginning inventory, remaining 5 units bought on 14 October and 68 units bought on 22 August. There total value is (5 x 84) + (5 x 100) + (68 x 94) = &7,312

Cost of Goods Sold = Total Goods Cost available for sale - Inventory ending valuation

$13,196 = $20,508 - $7,312

C. Weighted Average

In order to calculate Weighted average cost method we divide the total cost of inventory (Beginning and Purchased) with the total units, this yields average cost per unit. Then we multiple the average cost per unit with the units remaining after sales. As shown below:

$20,508 / 219 = $93.64 per unit

$93.64 x 78 units = $7,304

8 0

3 years ago

Gloria deposited $500 into a bank account that earned 7. 5% simple interest each year. She earned $225 in interest before closin

timama [110]

The number of years in which the money is in the account is 6 years.

<h3>What is simple interest?</h3>

Simple interest denotes the amount of payment that is received or paid by a person in return for anything pledged or given a loan.

The interest computed on the principal amount for a specified duration of time and rate of interest is called simple interest.

The formula of simple interest:

$\text{SI}= \text{P}\times r \times t$

Where, (P) stands for principal, (r) for interest rate, and (t) is for the time period.

Computation of a number of years:

According to the given information,

P=$500,

r=7.5%,

t=?

SI= $225

Now, substitute the given values in the above formula, we have:

$\text{SI}= \text{P}\times r \times t\\\\\$225=\$500\times\ 7.5\%\times t\\\\t= 6 \text{Years}$

Therefore, the number of years is 6 years.

To learn more about the simple interest, refer to:

brainly.com/question/2793278

5 0

2 years ago

Five days after signing a contract to purchase a new timeshare in North Carolina, the buyer cancels the timeshare contract. Acco

dangina [55]

Answer:

Under north Carolina's laws, the developer must refund the buyer's money within a 30 day period since the purchase date. North Carolina law also sets a deadline of 5 calendar days to cancel a timeshare contract, so this buyer barely made it on time. A buyer cannot waive his right to cancellation, even if the option is not included in the contract.

6 0

3 years ago

The following data pertain to an investment proposal (Ignore income taxes.):

Viefleur [7K]

Answer:

The closest answer is option A,$7649

Explanation:

The net present value of the investment is the present value of annual cost savings minus the initial cost of investment.

present of cash flow=cash flow/(1+r)^n

r is the discount rate of 12%

n is the year the cash flow relates to ,for instance year zero for the initial investment

NPV=-$54,000+$16,000/(1+12%)^1+$16,000/(1+12%)^2+$16,000/(1+12%)^3+$16,000/(1+12%)^4+($16,000+$7,000)/(1+12%)^5=$ 7,648.41

note that the project gives $7,000 in salvage value in year 5

4 0

3 years ago