Accounting Multiple Choice Question – 14 November 2017

The home of multiple choice questions for all your KS3, KS4 and KS5 Business Studies, Economics and Accounting requirements.

Accounting

A business is considering investing in new machinery. The machinery will cost £850 000. The cash flows are shown below and are assumed to accrue evenly during the year.

Table 13

Select ONE answer:

  1. 1 year 89 days
  2. 1 year 324 days
  3. 2 year 33 days
  4. 2 years 122 days
  5. 3 years 54 days

Show your workings to arrive at your answer, and explain and justify your reasons:
……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This is multiple choice question is suitable for Accounting KS5 classes.

The answer is 4 – Y0 cash outflow is £850k to buy the machine. After Y1, there was a net cash inflow of £250k (£450k – £200k) leaving a balance of the initial investment of negative £600k. After Y2, there was a net cash inflow of £450k (£650k -£200k) leaving a balance of the initial investment of negative £150k. Therefore in Y3 there is £150k to recoup on a linear basis and if the net cash inflow remains £450k (£650k -£200k) means that you will have repaid the investment at 2 years + (£150k / £450k) * 365 days which is 122 days rounded up.

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Author: stuart001uk2014

Referral marketing, business, economics and accounting s​pecialist & corporate mentor

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