The correct concerning the payback rule is rule is flawed because it ignores all cash flows after some arbitrary point in time.
Payback period in capital budgeting refers to the time required to recover funds spent on an investment or to reach breakeven. Example: If at the beginning of year 1 he invests $1,000 and at the end of year 1 and his second year he earns $500, it pays for itself within 2 years.
The number of years it will take to recover the money invested. For example, if it takes 5 years to recover the cost of an investment, the payback period is he 5 years.
Payback period is defined as the number of years required to recover the original cash investment. In other words, the period during which a machine, plant, or other investment has generated sufficient net income to cover its investment costs.
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Answer:
C) maturity
Explanation:
The four stages of the product life cycle are:
- Introduction Stage
-
Growth Stage
-
Maturity Stage: at this stage the product is already well established and its sales growth rate slows down. The highest sales level are achieved at this stage. This is also the stage at which the product faces the most competition, so the companies must modify and improve their products.
-
Decline Stage
Answer:
Initial outlay = $60,000
Annual net income before tax = $7,200 per annum
Depreciation = <u>Cost - Residual value</u>
Estimated useful life
= <u>$60,000 - 0</u>
12 years
= $5,000 per annum
Annual net cashflow before tax
= Annual net income before tax + Depreciation
= $7,200 + $5,000
= $12,200
Explanation:
In this case, the annual net income before tax has been given. The annual net income before tax has excluded depreciation, which does not involve movement of cash. Therefore, we need to add back depreciation in order to obtain the expected before tax cashflow.
Answer:
a) Limited liability company
Explanation:
Considering the options given, as an advisor the form of business that I would recommend is: limited liability company that is a structure in which the owners are not responsible with their personal assets for the company's debts as the three owners are concerned about this risk.
I would not advise the other forms of business because the sole proprietorship is a firm that is run by one person, the general partnership is a structure in which two or more people agree to share unlimited liability which means that they share all their personal assets and are responsible for any debt the company has with them and the master limited partnership is a company that trades securities in the market.
Answer:
Olympia Autos Inc. and Vaca Autos Inc.
This merger scenario illustrates the power of synergy.
Explanation:
Synergy is achieved with Olympia Autos Inc that has technological competencies, merging with Vaca Autos' marketing capacities. This enable the two entities to achieve more as one than they could have achieved individually. By capturing a larger market share, the two entities have shown that the combination of resources in pursuit of some common objectives is more beneficial than separate efforts.
