Suppose That Cash Flows of a Project Are Given as Follows

question 8

Multiple Choice

Suppose that cash flows of a project are given as follows: It is known that MARR is 10%. What is the project's payback period?

• A)one year
• B)two years
• C)three years
• D)four years
• E)The project does not pay back.

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Definitions:

Forecasted Cash Flows

Projections of how much cash a company will generate and use over a certain period, used for planning and investment assessment.

Capital Budgeting Investment Rule

Guidelines or criteria used by businesses to evaluate and select among potential investments or projects based on their expected returns or value.

Increase in Cost

A financial term indicating a rise in expenses or prices, affecting the overall cost structure of a business or the price level in an economy.

Internal Rate of Return (IRR)

The discount rate that makes the net present value (NPV) of all cash flows from a particular project zero, used to assess the profitability of potential investments.