CIPS L6M5 Exam - Topic 2 Question 15 Discussion

Actual exam question for CIPS's L6M5 exam

Question #: 15
Topic #: 2

Green Thumb Ltd, a landscaping company, is considering investing in a new lawn mower costing 10,000. The CFO estimates that the new machinery would increase annual income by approximately 2,000. What is the payback period of the investment?

A20%

B10 years

C5 years

D8,000

Show Suggested Answer

Suggested Answer: C

Payback period = Investment Cost Annual Cash Flow = 10,000 2,000 = 5 years.

by Torie at Aug 18, 2025, 09:30 AM

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Leonora

6 months ago

8,000? That’s not even a payback period!

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Lura

6 months ago

Wait, are we sure about those numbers? Seems off to me.

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Wynell

6 months ago

I thought it would be longer than that, but 5 years sounds right.

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Tamesha

7 months ago

The payback period is 5 years. Simple math!

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Edelmira

7 months ago

Definitely not 10 years, that’s way too long!

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Argelia

8 months ago

I thought the payback period was just a straightforward calculation, but I wonder if there are any hidden costs we should consider that might affect the actual payback time.

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Emily

8 months ago

I'm a bit confused about the options. I feel like 5 years makes sense, but I also remember something about considering other factors like maintenance costs.

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Chantell

8 months ago

I remember a similar question where we had to find the payback period, and I think it was just the investment divided by the annual cash flow. So, it should be 10,000 divided by 2,000, which is 5 years, right?

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Nenita

8 months ago

I think the payback period is calculated by dividing the initial investment by the annual income increase, but I'm not completely sure how to do that.

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Irma

9 months ago

I think I know how to do this, but I want to double-check my work. Let me walk through the steps to make sure I'm on the right track.

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Adela

9 months ago

Wait, how do I calculate the payback period again? I'm a little fuzzy on the formula for this type of problem.

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Raylene

9 months ago

I've got this! The payback period is just the initial investment divided by the annual income increase. Easy peasy.

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Minna

9 months ago

Hmm, I'm a bit unsure about this one. I'll need to think through the calculation carefully to make sure I get the right answer.

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Pilar

9 months ago

Okay, this looks straightforward. I just need to figure out the payback period based on the initial investment and the annual income increase.

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Oretha

10 months ago

Ooh, this is a tricky one. I'm leaning towards C, but I might need to double-check my calculations.

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Deeann

10 months ago

Actually, the payback period is calculated by dividing the initial investment by the annual income increase. So, 10,000 divided by 2,000 is 5 years. So, the answer is C) 5 years.

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