25.5.A - Traditional Techniques (Non-discounted Methods)
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Practice Questions
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What does the Payback Period measure?
💡 Hint: Think about how long it takes to make back your money.
Is the ARR based on cash flows or accounting profits?
💡 Hint: Consider what type of financial statement this refers to.
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Interactive Quizzes
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What does the Payback Period measure?
💡 Hint: Think about the meaning of 'payback'.
True or False: The Accounting Rate of Return considers cash flows.
💡 Hint: Consider which type of financial data is being referred to.
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Challenge Problems
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A company invests in a project costing $500,000. It expects to receive $150,000 per year for the first three years and $300,000 in the fourth year. Calculate the Payback Period and analyze if it is a worthwhile investment.
💡 Hint: Create a cash flow chart to visualize recovery.
An investment shows a $10,000 average annual profit out of a $50,000 investment. Discuss how this would affect decision-making, especially relevant to non-cash items.
💡 Hint: Consider non-cash items like depreciation and their impact on actual cash flow.
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