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invt appraisal qstn (mcq)

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › invt appraisal qstn (mcq)

  • This topic has 1 reply, 2 voices, and was last updated 1 year ago by John Moffat.
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  • Author
    Posts
  • September 4, 2021 at 9:04 am #634237
    cadhakan
    Member
    • Topics: 71
    • Replies: 123
    • ☆☆

    Details of a new machine are as follows:

    Capital cost $120,000
    Expected operating life
    Five years

    Expected scrap value at the end of five years $20,000
    Annual depreciation $20,000
    Expected annual profits from operations $40,000

    What is the payback period?

    Select one:
    3.0 years
    2.5 years
    2.0 years
    1.7 years

    sir when calculating payback period = initial invt / cash inflow
    does cashinflow include annual profit which is 40000$ and depreciation 20000$ ? sir i want know that in cashinflow we consider scrap value + annual profit ? i think dep not includedbut i am not sure . can you please advise me.. whether m wrong or right .. thank u in advance ..

    September 4, 2021 at 11:58 am #634271
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 51543
    • ☆☆☆☆☆

    Depreciation is not included because it is not a cash flow.

    Have you watched my free lectures on this?

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