If an asset costs $54280 and is expected to have a $4800 salvage value at the end of its 8-year life, and generates annual net cash inflows of $9200 each year, the cash payback period is

6.4 years.

5.9 years.

5.4 years.

8.0 years.

2.A disadvantage of the cash payback technique is that it

ignores obsolescence factors.

ignores the cost of an investment.

is complicated to use.

ignores the time value of money.

3.Multiple Choice Question 68

Sheffield, Inc. is considering purchasing equipment costing $43000 with a 5-year useful life. The equipment will provide cost savings of $9000 and will be amortized using the straight-line method over its useful life with no salvage value. Sheffield, Inc. requires a 11% rate of return. What is the approximate profitability index associated with this equipment? (Record answer to nearest cent)

Present Value of an Annuity of 1

Period

9% 10% 11% 12% 13% 16%53.8903.7913.6963.6053.5173.274

0.81

0.75

0.77

0.79