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

question 78

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 PI decision to evaluate this project; should it be accepted or rejected?
$$\begin{array} { l c c c c c c c c } \text { Time } & 0 & 1 & 2 & 3 & 4 & 5 & 6 \\\text { Cash Flow } & - \$ 85,000 & \$ 12,000 & \$ 11,000 & \$ 13,000 & \$ 21,000 & \$ 31,000 & \$ 32,000\end{array}$$

• A) PI = 6.94 percent, reject the project
• B) PI = ?7.52 percent, reject the project
• C) PI = ?4.21 percent, reject the project
• D) PI = 5.33 percent, accept the project

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Definitions:

Global Sourcing

The business practice of searching for and utilizing goods sources from around the world.

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The measure of an employee's output and efficiency in their work tasks and responsibilities.

Work Environment

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This refers to the practice of recognizing, understanding, and leveraging differences within the workforce to achieve competitive advantage.