The Following Four-Year Project Has an Initial Cost of $1,000,000

question 211

Multiple Choice

The following four-year project has an initial cost of $1,000,000. The future cash inflows for the next four years are $600,000, $500,000, $400,000, and $400,000, respectively. If the rate of return is
12%, determine the discounted payback period for this project.

• A) 2.74 years
• B) 2.44 years
• C) 2.14 years
• D) 1.94 years
• E) 1.74 years

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Definitions:

Aggregate Income

The total amount of income earned by individuals and businesses within an economy.

Consumption Function

An economic equation that illustrates the connection between gross national income and total consumption levels.

Consumption Function

An economic formula representing the relationship between total consumption and gross national income, indicating how much households intend to consume at various income levels.

Aggregate Income

The total income earned by all individuals and organizations in an economy over a specific period of time.