Answer:
$41,000,000
Explanation:
Excess reserves can be described as the amount of money that is kept by a bank. This amount of money can be given out to individuals or different organisations in the form of a loan, this is done to generate more profits as a certain amount of interest is being added to the amount of cash that will be given out.
In the scenario described above, the bank has an excess reserve of $41,000,000. Therefore, the bank will be willing to lend out $41,000,000 as loan.
To determine if a person is "in the business" of giving investment advice under the Investment Advisers Act of 1940, which of the following are considered?
I That the individual regularly gives advice on securities.
II That more than 50% of the individual's earnings are derived from making investment recommendations.
III That the individual receives compensation for giving advice on securities.
A. I only.
B. I and III only.
C. II and III only.
D. I, II, III.
Answer:
Correct Answer:
B. I and III only.
Explanation:
Someone in business of giving business advise is known as an investment adviser.
An investment adviser is a person or firm that is engaged in the business of providing investment advice to others or issuing reports or analyses regarding securities, for compensation. Based on the definition above, the best option for the question is Option B.
pryor frosted flakes company offers its customers a pottery cereal bowl if they send in 4 boxtops from flakes boxes and $1.00. The company estimates that 60% of the boxtops will be redeemed. In 2007, the company sold 500,000 boxes and costumers redeemed 220,000 boxtops receiving 55,000 bowls. if the bowls cost 2.50 each, how much liabilitiy for outstanding premiums should be recorded at the end od 2007?
Answer: $30,000
Explanation:
Company estimates that 60% of boxtops will be redeemed.
They sold 500,000 boxes
= 500,000 * 60%
= 300,000 boxtops will be sent in.
So far, 220,000 have been sent in. How many left;
= 300,000 - 220,000
= 80,000 boxtops are still to be sent in
4 boxtops are needed to receive a pottery bowl so with 80,000;
= 80,000/4
= 20,000 pottery bowls are due to be issued.
Each bowl costs $2.50 to make. Customers will send in $1 however so effectively it will cost the company;
= 2.50 - 1
= $1.50
With 20,000 still left to be issued, each costing $1.50, the total liabilitiy for outstanding premiums to be recorded at the end of 2007 is;
= 20,000 * 1.5
= $30,000
You find a zero coupon bond with a par value of $10,000 and 21 years to maturity. The yield to maturity on this bond is 4.3 percent. Assume semiannual compounding periods.What is the price of the bond?
Answer:
Price of bond $4,092.49
Explanation:
Computation the price of the bond
Using this formula
Price of bond=Par value*1/(1+YTM/2)^(2*time period)
Where,
Par value=$10,000
1/(1+YTM/2)=1/(1+0.043/2)
(2*time period)=(2*21 years)
Let plug in the formula
Price of bond=$10,000*1/(1+0.043/2)^(2*21)
Price of bond=$10,000*1/(1.0215)^42
Price of bond=$10,000*(0.97895252)^42
Price of bond=$10,000*0.4092497467
Price of bond=$4,092.49
Therefore the price of the bond will be $4,092.49
Standards are set by a.manufacturing engineers. b.accountants. c.other management personnel. d.All of these choices are correct
Answer: d.All of these choices are correct.
Explanation: all of the listed options all make use of standar, manufacturing engineer, accountant, and other management personnel make use of standards to estimate the acceptable production efficiency. Standards are also set by this personnel’s to motivate employees so as to achieve efficient operations and use of man power.
Reed Company is in the process of preparing its financial statements for 2022. During 2022, Reed changed from the double-declining balance method for its building to the straight-line method. The building originally cost $900,000. It had an original useful life of 25 years and a salvage value of $60,000. Purchase date was 1/1/20. The 2022 depreciation expense for the building will be:
Answer:
$30,511.30
Explanation:
The double declining method was used for two years
Depreciation expense using the double declining method = Depreciation factor x cost of the asset
Depreciation factor = 2 x (1/useful life) = 2 /25 = 0.08
Depreciation expense in 2020 = 0.08 x $900,000 = $72,000
Book value = $900,000 - $72,000 = $828,000
Depreciation expense in 2021 = 0.08 x $828,000 = $66,240
book value = $828,000 - $66,240 = $761,760
Straight line depreciation expense = (book value - Salvage value) / useful life
useful life = 25 - 2 = 23
book value = $761,760
salvage value = $60,000.
( $761,760 - $60,000. ) / 23 = $30,511.30
The depreciation expense for the remaining useful life of the asset would $30,511.30
You borrow $25,000 to be repaid in 24 monthly installments of $1,212.17. The annual interest rate is closest to:
Answer:
15%
Explanation:
For computing the annual interest rate we need to apply the RATE formula i.e to be shown in the attachment below;
Given that,
Present value = $25,000
Future value or Face value = $0
PMT = $1,212.17
NPER = 24 months
The formula is shown below:
= Rate(NPER;PMT;-PV;FV;type)
The present value come in negative
So, after applying the above formula,
The annual interest rate is
= 1.25% × 12 months
= 15%
The owners of a landscaping business decide they need insurance to cover their trucks in case of accidents , injuries caused by flying debris from their trimmers and blowers, and property damage caused by falling tree limbs. What type of policy should the owners consider to cover all of these risk?
A business owners policy
Answer:
it is a business owners policy
Explanation:
APEX
Firms that compete in the global marketplace typically face two types of competitive pressures, namely, the pressures for _______ and _______.
a. global integration; local responsiveness
b. politically sensitivity; market leadership
c. cost reductions; marginal costs
d. price reductions; cost reductions
Answer:
a. global integration; local responsiveness.
Explanation:
A competitive pressure in business management can be defined as the degree of competition faced by a firm which involves the process of seeking to have a significant share of the available customers and market in a specific industry.
Firms that compete in the global marketplace typically face two types of competitive pressures, namely, the pressures for global integration and local responsiveness.
A global integration can be defined as the degree to which a particular firm can make use of the available resources, products and methods in another country.
On the other hand, local responsiveness can be defined as the extent to which a particular firm must customize or tailor its products and methods of production in order to meet conditions in another country.
in which order would the expectancy theory place the following events? a) outcome valence, performance, effort b) performance, effort, outcome valence c) effort, outcome valence, performance d) performance, outcome valence, effort e) effort, performance, outcome valence
Answer: e. effort, performance, outcome valence
Explanation:
The expectancy theory analyses and explains the reason why people behave the way they do. The expectancy theory explains that individual behave the way they do because they believe their efforts which they put into a particular activity will bring about an outcome.
The first thing that comes first is the effort which one puts into an activity, after then is the performance and lastly the outcome.
Tanner-UNF Corporation acquired as a long-term investment $190 million of 8% bonds, dated July 1, on July 1, 2021. Company management has the positive intent and ability to hold the bonds until maturity, but when the bonds were acquired Tanner-UNF decided to elect the fair value option for accounting for its investment. The market interest rate (yield) was 10% for bonds of similar risk and maturity. Tanner-UNF paid $160 million for the bonds. The company will receive interest semiannually on June 30 and December 31. As a result of changing market conditions, the fair value of the bonds at December 31, 2021, was $170 million.
Required:
a. Prepare the journal entry to record Tanner-UNF's investment in the bonds on July 1, 2021.
b. Prepare the journal entry by Tanner-UNF to record interest on December 31, 2021, at the effective (market) rate.
c. At what amount will Tanner-UNF report its investment in the December 31, 2021, balance sheet? Why?
d. Suppose Moody's bond rating agency downgraded the risk rating of the bonds motivating Tanner-UNF to sell the investment on January 2, 2022, for S190 million. Prepare the journal entry to record the sale.
Answer and Explanation:
a. Investment in bonds Dr, $190 million
To Discount on bond investment $30 million
To Cash $160 million
(Being purchase of investment is recorded)
b. Cash Dr, ($190 × 8% × 6 ÷ 12) $7.6 million
Discount on bond investment Dr, $0.4 million
To Interest revenue ($160 × 10% × 6 ÷ 12) $8 million
(Being interest on bonds is recorded)
c. The computation of investment in the December is shown below:-
Bond investment $190 million
Less: discount on bond investment ($30 - $0.4) -$29.6 million
Amortization cost $160.40 million
As the company reports fair value of $190 million in its balance sheet. Also the timing of selling and purchase the investment is decided by the management as there is a market value, available for sale securities, the market rate of return varies and the short term, as well as the long term securities, are also invested
d. Cash Dr, $190 million
Discount on Bonds investment Dr, $29.6 million ($30 million - $0.4 million )
Loss on sale of bonds Dr, $29.6 million
To Investment in bonds $190 million
(Being sale of bonds is recorded)
You short-sell 100 shares of Tuckerton Trading Co., now selling for $44 per share. What is your maximum possible gain, ignoring transactions cost
Answer:
$4,400
Explanation:
Calculation for the maximum possible gain, ignoring transactions cost
Using this formula
Maximum possible gain = Sale proceeds - Cost of purchasing the share
Let plug in the formula
Maximum possible gain = (100 shares *$44 per shares)- (100 shares *0) = 14000
Maximum possible gain=$4,400-0
Maximum possible gain=$4,400
Therefore the maximum possible gain, ignoring transactions cost will be $4,400
Differentiate between team and teamwork
Team - A team is a group of individuals working together to achieve their goal(s).
Teamwork - Teamwork is the collaborative effort of a group to achieve a common goal or to complete a task in the most effective and efficient way. This concept is seen within the greater framework of a team, which is a group of interdependent individuals who work together towards a common goal.
(From Wikipedia)
Answer:
The correct answer is
Explanation:
Team: A group of people working together to achieve their goals.
Teamwork: A skill used by a group of people to achieve their required goal. It helps to finish the work perfectly and efficiently. It also shows that the members of that particular group are skillful and hard working.
Hope this helps....
Have a nice day!!!!
The market for hot dogs on the streets of New York City can be considered close to a perfectly competitive market. Because there are so many individuals buying and selling hot dogs:
Question:
The market for hot dogs on the streets of New York City can be considered close to a perfectly competitive market. Because there are so many individuals buying and selling hot dogs:
A) there is a shortage of hot dogs
B) there is a surplus of hot dogs
C) market forces set the price in the market
D) firms are able to make large economic profits
E) firms cannot make positive accounting profits
Answer:
The correct answer is C.
Explanation:
Perfect competition is a market/ industry situation where there are numerous companies producing similar or perfect substitute products. Also, in the same market, none of the players is large enough to single-handedly influence the market especially with respect to price.
Cheers!
Lawrence Industries' most recent annual dividend was $2.28 per share (D0=$2.28), and the firm's required return is 13%. Find the market value of Lawrence's shares when dividends are expected to grow at 8% annually for 3 years, followed by a 7% constant annual growth rate in years 4 to infinity.
Answer:
Value of stock = $41.75
Explanation:
The price of a stock using the dividend valuation model is the present value of the the future dividend expected from the stock discounted at the required rate of return.
value of dividend from year 1 to 3
Year Present Value
1 2.28× 1.08^1 × 1.13^(1-) = 2.179
2 2.28× 1.08^2 × 1.13^(-2) = 2.083
3. 2.28 × 1.08^3 × 1.13^(-3)= 1.991
Present value of Dividend in Year 4 and beyond
This will be done in two steps
Step 1 :PV in year 3 terms
= Dividend in year 4× (1.06)/(0.1-0.06)
2.28 × 1.08^3 × 1.07/(0.13-0.07)= 51.220
step 2 : PV in year 0 terms =
PV in year 3 × 1.1^(-3)
=51.220 × 1.13^(-3)= 35.498
Value of stock = 2.179 +2.083 +1.991 + 35.498 = 41.75
Value of stock = $41.75
The Treasury bill rate is 4% and the market risk premium is 7%.
Project Beta Internal rate of return %
P 1.0 14
Q 0 6
R 2.0 18
S 0.4 7
T 1.6 20
Required:
a. What are the project costs of capital for new ventures with betas of 0.75 and 1.75?
b. Which of the following capital investments have positive NPVs?
1. P
2. Q
3. R
4. S
5. T
Answer:
the answer is going to be 3. R
If the distribution of water is a natural monopoly, then:__________.
a. a single firm cannot serve the market at the lowest possible average total cost.
b. allowing for competition among different firms in the water-distribution industry is efficient.
c. average cost increases as the quantity of water produced increases.
d. multiple firms would likely each have to pay large fixed costs to develop their own network of pipes.
Answer:
d. multiple firms would likely each have to pay large fixed costs to develop their own network of pipes.
Explanation:
Option a is wrong because:
The initial investment is very high, therefore, the more firms competing will only increase the required investments and fixed costs associated with them, e.g. depreciation, maintenance. That is why the lowest average costs is generally achieved when only one firm serves this type of market.
Option b is wrong because:
A natural monopoly exists because it is extremely difficult for two or more competing firms to exist. Generally the required investment is very high, and the revenues are not large enough to allow two or more firms to compete.
Option c is wrong because:
Utilities require large initial investments, but once they are set up, the production costs are very small. I.e. the fixed costs are more relevant than the variable costs. Average production costs as decrease as the quantity produced increases.
An investor owns 5,000 shares, which is 1% of a corporation's outstanding stock before a stock repurchase. The investor did not sell any of his stock during the 25,000 share repurchase. Which one of the following statements is correct?
A. The investor still owns 1% of the corporation.
B. The stock's price is likely to drop by 5%.
C. The investor owns more than 1% of the corporation.
D. The investor now has 5,250 shares.
Answer:
C. The investor owns more than 1% of the corporation.
Explanation:
data provided in the question
Number of shares own = 5,000 shares
Outstanding stock percentage = 1%
Repurchased shares = 25,000
Based on the above information, the following statement is correct
i.e the investor owns more than 1% of the corporation as the A option, B and D options are incorrect and the option C is most appropriate option
. Which of these statements is true about the field of organizational behavior? 1 point A. It examines how individuals and teams in organizations relate to one another and to their counterparts in other organizations. B OB researchers systematically study various topics at a common level rather than at multiple levels. C. Information technology has almost no effect on organizational behavior. D. The field of organizational behavior relies exclusively on ideas generated within the field by organizational behavior scholars. E. The origins of organizational behavior are traced mainly to the field of economics.
Answer:
A. It examines how individuals and teams in organizations relate to one another and to their counterparts in other organizations.
Explanation:
Organizational behavior examines how individuals and teams in organizations relate to one another and to their counterparts in other organizations.
An organizational behavior can be defined as the study of people's opinions, feelings, actions and how people perceive an organization.
This ultimately implies that, an organizational behavior is the study of people's opinions, feelings, actions and how people perceive an organization.
Basically, it measures how an organization relates with its external environments. This is very key to formulating policies, mission and achieving a successful long-term organizational goals and objectives.
Owen expects to receive at the end of next year from a trust fund. If a bank loans money at an interest rate of , how much money can he borrow from the bank on the basis of this information?
Answer: a) $18,605
Explanation:
The amount he can borrow today will be an amount that when grown at a rate of 7.5% per year will equal $20,000 in a year.
20,000 = Amount + ( Amount * rate * time)
20,000 = Amount + (7.5% * Amount)
2,000,000 = 1.075 * Amount
Amount = $18,605
What best explains why a firm's ratio of long-term debt/total capital is lower than the industry average, while the ratio of income before interest and taxes/debt interest charges is higher than the industry average
Answer:
The lower ratio of long-term debt to total capital is explained by the fact that the company is not highly geared or leveraged in comparison to the industry average firm.
This also explains why the ratio of income before interest and taxes to the debt interest charges is higher than the industry average because the firm does not pay so much in interest expense as the average firm in its industry.
Explanation:
Company X's leverage determines its ratio of long-term debts to total capital. If Company X has large long-term debts it will have a higher long-term debts to total capital ratio and vice versa. In that situation, Company X will also pay more in interest, causing its ratio of income before interest and taxes to the interest charges to be higher than the industry average, and vice versa.
What is the difference between full absorption costing and variable costing?A. In full absorption costing, all of the non-manufacturing costs are expensed. In variable costing, all of the non-manufacturing expenses are included in the cost of the product.B. In full absorption costing, fixed manufacturing overhead is expensed. In variable costing, fixed manufacturing overhead is included in the cost of the product.C. In full absorption costing, fixed manufacturing overhead is included in the cost of the product. In variable costing, fixed manufacturing overhead is expensed.D. Variable costing must be used for external financial reports while full absorption costing can only be used for internal reporting.
Answer: C. In full absorption costing, fixed manufacturing overhead is included in the cost of the product. In variable costing, fixed manufacturing overhead is expensed.
Explanation:
Full absorption costing accounts for all the costs involved in making a product including the indirect and the direct costs. That means both variable costs like direct materials and direct labor as well as fixed costs like rent, and insurance are included in the cost of the product.
Variable costing on the other hand expenses fixed manufacturing overhead separately. As a result, Full absorption has a higher cost of inventory than does Variable costing.
Courtney's Caffeine Castle is investigating the feasibility of adding a new espresso maker to its line-up of products. The marketing department believes that 15,000 units can be sold at $90 each. Courtney's requires a 30% profit margin (i.e. cost is 70% of selling price) on all products. To achieve its goal, Courtney's must keep total costs equal to or below:
A. $675,000.
B. $900,000.
C. $661,500.
D. $945,000.
Answer:
D. $945,000.
Explanation:
Sam and Suzy Sizeman need to prepare a cash budget for the last quarter of 2020 to make sure they can cover their expenditures during the period. Sam and Suzy have been preparing budgets for the past several years and have been able to identify the percentage of their income that they pay for most of for their cash outflows. These percentages are based on their take-home pay (e.g., monthly utilities normally run 5.1% of monthly take-home pay).
The information in the following table can be used to create their fourth-quarter budget for 2013.
Income
Monthly take-home pay $4,900
Expenses:
Housing 30%
Utilities 5%
Food 10%
Transportation 7%
Medical/dental 0.5%
Clothing for October and November 3%
Clothing for December $440
Property taxes (November only) 11.5%
Appliances 1%
Personal care 2%
Entertainment for October and November 6%
Entertainment for December $1,500
Savings 7.5%
Other 5%
Excess cash 4.5%
Required:
a. Prepare a quarterly cash budget for Sam and Suzy covering the months October through December 2013.
b. Are there individual months that incur a deficit?
c. What is the cumulative cash surplus or deficit by the end of December 2013?
Answer:
a) Statement showing Cash Budget
Particulars October$ November$ December$ Total
$
Monthly take 4,900.00 4,900.00 4,900.00 14,700.00
home pay
Housing at 30% 1,470.00 1,470.00 1,470.00 4,410.00
Utilities at 5% 245.00 245.00 245.00 735.00
Food at 10% 490.00 490.00 490.00 1,470.00
Transportation 343.00 343.00 343.00 1,029.00
at 7%
Medical at 0.5% 24.50 24.50 24.50 73.50
Clothing at 3% 147.00 147.00 - 294.00
for Oct and Nov
Clothing for Dec - - 440.00 440.00
Property Taxes - 563.50 - 563.50
at 11.5% for Nov
Appliances at 1% 49.00 49.00 49.00 147.00
Personal Care 98.00 98.00 98.00 294.00
at 2%
Entertainment 294.00 294.00 - 588.00
at 6% for Oct and Nov
Entertainment - - 1,500.00 1,500.00
for Dec
Savings at 7.5% 367.50 367.50 367.50 1,102.50
Other 5% 245.00 245.00 245.00 735.00
Excess Cash 220.50 220.50 220.50 661.50
at 4.5%
Remaining Cash 906.50 343.00 -592.50 657.00
b) Yes- In December there is a deficit of $592.50
c) Cumulative surplus is of $657 by end of Dec 2013
Piedmont Hotels is an all-equity company. Its stock has a beta of 1.23. The market risk premium is 6.9 percent and the risk-free rate is 2.7 percent. The company is considering a project that it considers riskier than its current operations so it wants to apply an adjustment of 1.9 percent to the project's discount rate. What should the firm set as the required rate of return for the project
Answer:
The required rate of return for the project will be 13.087%
Explanation:
To calculate the required rate of return for the project, we must first calculate the required rate of return for the firm's equity. The required rate of return can be calculated using the CAPM or Capital Asset Pricing Model equation. The formula for required rate of return (r) under this model is,
r = rRf + Beta * rpM
Where,
rRF is the risk free raterpM is the risk premium on marketr = 0.027 + 1.23 * 0.069
r = 0.11187 or 11.187%
The discount rate that is usually used for an all equity firm is its required rate of return. Thus, the required rate of return for the project will be,
r = 0.11187 + 0.019
r = 0.13087 or 13.087%
Calculate gross profit ratio and cost of goods sold Refer to the consolidated statements of earnings in the Campbell Soup Company annual report in the appendix.
Required:
a. Calculate the gross profit ratio for each of the past three years.
b. Assume that Campbell's net sales for the first four months of 2015 totaled 527 billion. Calculate an estimated cost of goods sold and gross profit for the four months.
Answer:
gross profit ratio = (total revenue - cost of goods sold) / total revenue
I looked for the missing information:
year total sales cost of goods sold
2012 $7,175 $4,365
2013 $8,052 $5,140
2014 $8,268 $5,370
a)
gross profit ratio:
2012 = ($7,175 - $4,365) / $7,175 = 39.16%
2013 = ($8,052 - $5,140) / $8,052 = 36.16%
2014 = ($8,268 - $5,370) / $8,268 = 35.05%
b)
since the gross profit margin ratio is decreasing every year, we can assume that it will keep decreasing in 2015. Using linear regression, the slope is -0.02055. So the estimated gross profit margin ratio for 2015 = 34.33%
estimated cogs (first four months of 2015) = $527 billion x (1 - 34.33%) = $346.08 billion
estimated gross profit (first four months of 2015) = $527 billion x 34.33% = $180.92 billion
During 2018, its first year of operations, Pave Construction provides services on account of $126,000. By the end of 2018, cash collections on these accounts total $93,000. Pave estimates that 20% of the uncollected accounts will be bad debts. Required: a. Record the adjustment for uncollectible accounts on December 31, 2018.b. Calculate the net realizable value of accounts receivable.
Answer: Please see answer in the explanation column
Explanation:
Account receivables = Total account - cash collections
$126,000 -- $93,000
= $33,000
Uncollectible Accounts = 20% x 33,000 = $6,600
a) Journal to record the adjustment for uncollectible accounts
Date Account Debit Credit
Dec 31, 2018 Bad debts expense $6,600
Allowance for uncollectible accounts $6,600
B) net realizable value of accounts receivable= Total Accounts Receivable - Allowance for uncollectible accounts
= $33,000 - $6,600= $26400
What's the future value of an investment of $1 a year for each of 4 years, at the end of the last year? Suppose the interest rate is 8%.
Answer:
4.51
Explanation:
We have to calculate fva. The future value of annuity
Here is the formula
Fva = A [( + I)^n-1/I]
Where a = annuity
I = interest rate
N = number of years
Inserting into formula
1[(1+0.08)^4 - 1/0.08]
= 1[(1.36049 - 1)/0.08]
= 4.51
Therefore the future investment is $4.51
A piece of equipment (Asset class 15.0) was purchased bythe Jones Construction Company. The cost basis was $300,000. Determinethe ADS and GDS depreciation deductionfor this property each year
Answer:
Alternative depreciation system (ADS depreciation) per year:
Year % depreciation expense
1 8.32% $24,960
2 16.67% $50,010
3 16.67% $50,010
4 16.67% $50,010
5 16.67% $50,010
6 16.67% $50,010
7 8.33% $24,990
General depreciation system (GDS depreciation) or MACRS per year:
Year % depreciation expense
1 20% $60,000
2 32% $96,000
3 19.20% $57,600
4 11.52% $34,560
5 11.52% $34,560
6 5.76% $17,280
TB MC Qu. 7-77 Corbel Corporation has two divisions: Division A and ... Corbel Corporation has two divisions: Division A and Division B. Last month, the company reported a contribution margin of $47,700 for Division A. Division B had a contribution margin ratio of 35% and its sales were $231,000. Net operating income for the company was $27,200 and traceable fixed expenses were $59,700. Corbel Corporation's common fixed expenses were:
Answer:
Corbel Corporation's common fixed cost is $41,650
Explanation:
Division A contribution margin $47,700
Division B contribution Margin $80,850 $128,550
($231,000 * 35%)
Less: Traceable fixed cost $59,700
Operating Income $27,200 ($86,900)
Common fixed cost $41,650
X-treme Vitamin Company is considering two investments, both of which cost $20,000. The cash flows are as follows: Year Project A Project B 1 $ 23,000 $ 20,000 2 10,000 9,000 3 10,000 15,000 Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods. a-1. Calculate the payback period for Project A and Project B. (Round your answers to 2 decimal places.) a-2. Which of the two projects should be chosen based on the payback method
Answer:
Project A = 0.87 years
Project B = 1 year
2 Project should be chosen because it has a shorter payback period.
Explanation:
Payback calculates the amount of time it takes to recover the amount invested in a project from it cumulative cash flows.
For project A, the payback period is $20,000 / $23,000 = 0.87 years
For project B, the payback period is $20,000 / $20,000 = 1 year
Project should be chosen because it has a shorter payback period.
