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

question 348

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. What is the payback period of the project?

• A) The project never pays back.
• B) 4.75 years
• C) 5.00 years
• D) 5.33 years
• E) 6.00 years

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Definitions:

Variance of Returns

A statistical measurement of the dispersion of returns for a given security or market index, often used as a measure of volatility or risk.

Security Market Line

A representation in the Capital Asset Pricing Model (CAPM) showing the expected return of a security or portfolio in relation to its risk (beta).

Reward to Risk Ratio

A metric utilized by investors for comparing the anticipated gains from an investment against the risk incurred to attain those gains.

Beta

An indicator of the level of systematic risk or volatility of a security or a portfolio relative to the entire market.