ITPEC FE Morning October 2023 Question 61
The purchase of two types of IT devices A and B is being examined. The payout period is set in consideration of the useful life of each of the devices. Which of the following is an appropriate description for the minimum amount of annual profit necessary to recover the amount of investment within the set payout period for A and B? Here, the annual profit is made evenly each year, and the interest rate is not considered.
Explanation
B needs twice the annual profit of A — divide each investment by its payout period to get the minimum annual profit.
- •A: 90 ÷ 3 = 30, i.e. 300,000 yen a year
- •B: 300 ÷ 5 = 60, i.e. 600,000 yen a year
- •Ratio: 60 ÷ 30 = 2, so B must earn twice as much as A
Answer (d)
Why not others:
- •(a) — the same profit of 30 a year would recover only 30 × 5 = 150 of B's 300 within five years
- •(b) — reverses the ratio: A needs 30 and B needs 60, so it is B that needs twice the profit
- •(c) — 1.5 times A's 30 is 45 a year, which recovers only 45 × 5 = 225 of B's 300
Key rule: With even annual profit and no interest, the minimum annual profit is investment ÷ payout period; compare those quotients, not the investments or the periods alone.
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