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AICPA CPA-Business Exam - Topic 3 Question 124 Discussion

Actual exam question for AICPA's CPA-Business exam
Question #: 124
Topic #: 3
[All CPA-Business Questions]

Willis, Inc. has a cost of capital of 15 percent and is considering the acquisition of a new machine, which costs $400,000 and has a useful life of five years. Willis projects that earnings and cash flow will increase as follows.

What is the payback period of this investment?

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Suggested Answer: B

Choice 'b' is correct. 3.00 year payback period.

Note: After 3 years, the initial investment is recovered, as the cumulative cash inflows equal $400,000. The cash flows are not discounted when the payback method is used.


by Miesha at Apr 13, 2026, 02:32 AM

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Jean
2 days ago
This seems similar to a question we did in class where we had to find the payback period. I think it’s around 3 years based on the cash flows.
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Alise
7 days ago
I remember we practiced calculating payback periods, but I’m not sure how to apply it with these cash flows.
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