A Project Manager Is Using the Payback Method to Make

question 22

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 non-discounted payback of a project that has cash flows as shown in the table?

• A)3.5 years
• B)2.6 years
• C)5.0 years
• D)4.2 years

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Definitions:

Consumption Function

A formula in economics showing how total consumption is related to the gross national income.

Aggregate Income

The total income earned by individuals and businesses in an economy over a specific period, before taxes.

Aggregate Income

The total amount of income earned by individuals and businesses within an economy.

Consumption Function

An economic equation that illustrates the connection between gross national income and total consumption levels.