IMANET Exam CMA Topic 4 Question 85 Discussion

Actual exam question for IMANET's CMA exam

Question #: 85
Topic #: 4

[All CMA Questions]

A characteristic of the payback method (before taxes) is that it

AIncorporates the time value of money.

BNeglects total project profitability.

CUses accrual accounting inflows in the numerator of the calculation.

DUses the estimated expected life of the asset in the denominator of the calculation.

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Suggested Answer: B

If the 8% return exactly equals the present value of the future flows ., NPV is zero), then simply determine the present value of the future inflows. Thus, Hopkins Company's initial cash outlay is $19,090 [($2,500)(PVIFA at 8% for 10 periods) + ($5J00)(PVlF at 8% for 10 periods ($2,500)(6.710) + ($5,000)(.463)].

by Benedict at Apr 20, 2024, 06:09 AM

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