A Project Costs $475 and Has Cash Flows of $100

question 413

Multiple Choice

A project costs $475 and has cash flows of $100 for the first three years and $75 in each of the project's last five years. If the discount rate is 10%, what is the discounted payback period?

• A) The project never pays back on a discounted basis
• B) 5 years
• C) 6 years
• D) 7 years
• E) 8 years

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Definitions:

Taxable Income

The amount of an individual's or a company's income used to determine how much tax is owed to the government.

Progressive

Pertaining to a taxation system where the tax rate increases as the taxable amount increases, aiming for a more equitable distribution of wealth.

Inelastic

A characteristic of a good or service whose demand does not change significantly when its price changes.

Efficiency Loss

Reductions in combined consumer and producer surplus caused by an underallocation or overallocation of resources to the production of a good or service. Also called deadweight loss.