A Firm Is Evaluating a Proposal Which Has an Initial

question 117

Multiple Choice

A firm is evaluating a proposal which has an initial investment of $50,000 and has cash flows of $15,000 per year for five years. The payback of the project is:

• A) 1.5 years
• B) 2 years
• C) 3.3 years
• D) 4 years
• E) none of the above

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Definitions:

Binomial Probabilities

The probabilities of obtaining a given number of successes in a fixed number of binary trials.

Normal Random Variable

A normal random variable is a variable whose values are subject to fluctuations according to a normal distribution.

Standard Deviations

A measure of the dispersion or variability in a dataset, indicating how much individual data points deviate from the mean.

Mean

The average value of a set of numbers, calculated by dividing the sum of all the numbers by the count of the numbers.