Payback Period and Cash Flow Analysis
Flashcard
•
Business
•
12th Grade
•
Practice Problem
•
Hard
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1.
FLASHCARD QUESTION
Front
What does the payback period measure?
Back
The time it takes for an investment to recover its initial cost
2.
FLASHCARD QUESTION
Front
If an investment of $200,000 generates annual net cash flows of $50,000, the payback period is:
Back
4 years
3.
FLASHCARD QUESTION
Front
In Table 3, during which year does the cumulative net cash flow become positive?
Back
Year 3
4.
FLASHCARD QUESTION
Front
What is the exact payback period for the $200,000 machine example?
Back
2 years and 6 months
5.
FLASHCARD QUESTION
Front
Which of the following is a limitation of the payback period method?
Options:
It considers inflation in future cash flows,
It ignores long-term profitability,
It is too complex for businesses to use,
It measures qualitative factors such as social impact
Back
It ignores long-term profitability
6.
FLASHCARD QUESTION
Front
True or False? Net cash flow is calculated by subtracting cash inflows from cash outflows.
Back
False
7.
FLASHCARD QUESTION
Front
True or False? In Year 0 of investment appraisal, the net cash flow is always negative.
Back
True
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