Reference no: EM132558092

Questions -

Q1: Which of the following statements is true?

a. PP tends to be more favourable to longer-term projects than to short-term ones.

b. ARR and PP both take all cash flows into account, but ARR ignores their timing; PP takes timing into account.

c. ARR and PP both take the timing of cash flows into account, but PP ignores some relevant cash flows.

d. ARR takes all cash flows into account but ignores their timing; PP takes timing into account but ignores some cash flows.

Q2: A machine costs $100,000 and is expected to last four years, with a residual value of $10,000. Straight-line depreciation is used. The machine will earn a profit of $120,000 (after depreciation) over its life, equally each year. What is the machine's payback period?

a. Cannot be calculated from the given information.

b. 3 years

c. 1.9 years

d. 3.3 years