1. Annual income divided by the average investment amount in a project, is the:
a. Accounting rate of return.
b. Net present value rate.
c. Profit rate.
d. Payback rate.
e. Earnings from investment.
2. A company is considering the purchase of a new piece of equipment for $95,000. It is expected to produce the following net cash flows. The payback period is:
Year 1 Year 2 Year 3 Year 4 Year 5
Net cash flows $ 38,500 $ 32,500 $ 20,500 $ 14,500 $ 8,500
a. 4.24 years.
b. 2.64 years.
c. 2.92 years.
d. 2.47 years.
e. 3.24 years.