Tim Is Considering Two Projects, Both of Which Have an Initial

question 53

True/False

Tim is considering two projects, both of which have an initial cost of $12,000 and total cash inflows
of $15,000. The cash inflows of project A are $1,000, $2,000, $4,000, and $8,000 over the next
four years, respectively. The cash inflows for project B are $8,000, $4,000, $2,000 and $1,000 over
the next four years, respectively. Which one of the following statements is correct if Tim requires a
10 percent rate of return and has a required discounted payback period of 3 years? Given this
information, Tim should accept project A because it has a payback period of 2.65 years.

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Definitions:

Negatively Skewed

Describes a distribution of data where the tail is longer on the left side of the distribution's peak, indicating that the majority of values are to the right of the mean.

Standard Deviation

A statistic that measures the dispersion or spread of a set of data points relative to its mean.

Standard Deviation

A statistical measure that indicates the dispersion or variability of a set of data points in relation to their mean.

Variability

The extent to which data points in a data set or distribution differ from each other and from the central value (mean or median).