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

question 108

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 8 percent, and that the maximum allowable payback and discounted payback statistic for the project are three and three and a half years, respectively.
$$\begin{array} { | l | c | c | c | c | c | c | } \hline \text { Time } & 0 & 1 & 2 & 3 & 4 & 5 \\\hline \text { Cash Flow } & - 100,000 & 30,000 & 45,000 & 55,000 & 30,000 & 10,000 \\\hline\end{array}$$
Use the NPV decision rule to evaluate this project; should it be accepted or rejected?

• A) $35,995.86, reject
• B) $38,875.53, accept
• C) $138,875.53, accept
• D) $238,875.53, accept

---

Definitions:

Literature Search

The comprehensive process of locating relevant academic and scholarly materials on a specific topic for research purposes.

Hand Dominance

Hand dominance refers to an individual's preference for using one hand over the other to perform activities and tasks, typically classified as right-handedness, left-handedness, ambidexterity, or mixed-handedness.

Creativity

The ability to produce original and unusual ideas, or to make something new or imaginative.

Psychological Abstracts

Summaries of psychological research findings and literature.