Consider an Investment Opportunity That Requires an Initial Cash Outlay

question 43

Multiple Choice

Consider an investment opportunity that requires an initial cash outlay of $28,500 and provides cash flows of $8,500 in year 1, $10,000 in year 2, $11,500 in year 3, and $13,000 in year 4.The cost of capital is 12%.What is the discounted payback period of the project?

• A)2.87 years
• B)3.37 years
• C)3.42 years
• D)3.58 years

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Definitions:

Annual Dividend

This is the total amount of dividends a company pays out to its shareholders over a fiscal year, usually expressed on a per share basis.

Market Price

The current price at which an asset or service can be bought or sold in a particular marketplace.

Standard Deviation

Standard deviation is a statistical measure that quantifies the variability or dispersion of a set of data points or investment returns around their mean.

Historical Returns

Historical returns refer to the past performance or yield of an investment or portfolio over a specified period of time.