JJ's Is Reviewing a Project with a Required Discount Rate

question 13

Multiple Choice

JJ's is reviewing a project with a required discount rate of 15.2 percent and an initial cost of $309,000. The cash inflows are $47,000, $198,000, and $226,000 for Years 2 to 4, respectively. Should the project be accepted based on discounted payback if the required payback period is 2.5 years?

• A) Accept; The discounted payback period is 2.18 years.
• B) Accept; The discounted payback period is 2.32 years.
• C) Accept; The discounted payback period is 2.98 years.
• D) Reject; The discounted payback period is 3.87 years.
• E) Reject; The project never pays back on a discounted basis.

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Definitions:

Licensee

An individual or entity that has been granted the right to use, operate under, or engage in activities protected by another's intellectual property rights.

Trespassers

Individuals who enter or remain on a property without the permission or legal right to do so.

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Approval legal definied by the owner or holder of property for another party to use or occupy that property.

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Physical or psychological harm to a person resulting from someone else's negligence, intentional actions, or strict liability.