Planning capital investment decisions
9. Which one of the following is not a reason why a company should carefully plan its capital investment decisions?
a. Capital investments usually require a large initial outlay of capital.
b. Capital investments are usually tied to management bonus plans.
c. Capital investment decisions affect earnings over a long period.
d. Capital investments are less liquid, so poor investment decisions are difficult to reverse.
My answer is d. is this correct?
The company paid $50,000 cash for a capital investment.
10. The company paid $50,000 cash for a capital investment. The company expects the investment to generate net cash inflows of $8,400 per year. What is the payback period of this investment? (rounded)
a. 6 years
b. 5 years
c. 4 years
d. Cannot be determined from the information
My answer is a. 6 years, am I on the right track? Any advice is appreciated.
Thank you.
