1. What are the two primary drawbacks to the payback period method?
a. Difficult to calculate; only works for long projects (e.g., 5 years or more)
b. Ignores time value of money; ignores cash flows after payback is reached.
c. Only works for long projects; ignores cash flows after payback is reached.
d. Difficult to calculate; ignores cash flows after payback is reached
e. Difficult to calculate; ignores time value of money
2. A company is considering purchasing a piece of equipment that costs $5 million. The company will further incur a cost of $50,000 to deliver and install the equipment. If the equipment has a 10-year useful life and the company uses straight-line depreciation, then what is the yearly depreciation expense?
a. $505,000
b. $5,000
c. $500,000
d. $0