Suppose Your Firm Is Considering Investing in a Project with the Cash

question 24

Multiple Choice

Suppose your firm is considering investing in a project with the cash flows shown as follows, that the required rate of return on projects of this risk class is 10 percent, and that the maximum allowable payback and discounted payback statistics for the project are three and a half and four and a half years, respectively. Use the discounted payback decision to evaluate this project; should it be accepted or rejected?
$$\begin{array} { l c c c c c c c c c } \text { Time } & 0 & 1 & 2 & 3 & 4 & 5 & 6 \\\text { Cash Flow } & - \$ 5,000 & \$ 1,200 & \$ 1,400 & \$ 1,600 & \$ 1,600 & \$ 1,100 & \$ 2,000\end{array}$$

• A) Discounted payback = 4.25 years, accept the project
• B) Discounted payback = 3.50 years, accept the project
• C) Discounted payback > 5 years, reject the project
• D) Discounted payback = 4.67 years, reject the project

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Definitions:

Axons

Long, slender projections of nerve cells (neurons) that transmit electrical impulses away from the neuron's cell body.

Auditory Route

A pathway in the brain that processes auditory information from the ears to the auditory cortex.

Cochlear Nucleus

An auditory brainstem structure where the cochlear nerve fibers synapse, playing a pivotal role in initial sound processing.

Medial Geniculate

Part of the thalamus involved in the auditory pathway, acting as a relay station for sound information to the auditory cortex.