Using a Required Rate of Return of 12 -What Is This Project's Payback Period If Initial Capital Investment

question 23

Multiple Choice

Using a required rate of return of 12%.
$\begin{array} { | c | r | } \hline { \text { Perpetual Power Machine Co. - Purchase of a New High Machining Tool } } \\\hline \text { Year } & \text { Cash Flow } \\\hline \text { Year 1 } & \$ 500 \\\hline \text { Year 2 } & \$ 500 \\\hline \text { Year 3 } & \$ 3,000 \\\hline \text { Year 4 } & \$ 3,000 \\\hline \text { Year 5 } & \$ 10,000 \\\hline\end{array}$
-What is this project's payback period if initial capital investment is $7,500?

• A) 3 years 3 months
• B) 5 years
• C) 9 years
• D) 4 years 2 months

---

Definitions:

Validity

refers to the extent to which a test, instrument, or research study accurately measures what it intends to measure.

Rorschach Test

A psychological test in which subjects' perceptions of inkblots are recorded and then analyzed using psychological interpretation.

Validity

The extent to which a test, tool, or study accurately measures or reflects what it intends to measure.

Interpretive Value

The significance or meaning that is attributed to a piece of information or data when it is analyzed or understood in a particular context.