A Project Manager Is Using the Payback Method to Make

question 11

Multiple Choice

A project manager is using the payback method to make the final decision on which project to undertake.The company has a 10% required rate of return and expects a 4% rate of inflation for the following five years.What is the discounted payback of a project that has cash flows as shown in the table?

• A)3.4 years
• B)2.6 years
• C)5.0 years
• D)4.2 years

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Definitions:

Normal Distribution

This refers to a probability distribution where symmetry around the mean indicates higher frequency of data points near the mean than those far from it.

Average Annual Revenue

This refers to the amount of money a company earns in a year, on average, from its operations.

Standard Deviation

A metric indicating the extent to which data points diverge from the mean, showing the distribution's spread.

Average Annual Revenue

The mean income generated by a business, entity, or asset within one fiscal year.