A Project Manager Is Using the Payback Method to Make

question 14

Multiple Choice

A project manager is using the payback method to make the final decision on which project to undertake.The company has a 10% required rate of return and expects a 4% rate of inflation for the following five years.What is the non-discounted payback of a project that has cash flows as shown in the table? $$\begin{array} { | l | l | } \hline \text { Year } & \text { Cash Flow } \\\hline 0 & -\$ 500,000 \\\hline 1 & \$ 50,000 \\\hline 2 & \$ 75,000 \\\hline 3 & \$ 150,000 \\\hline 4 & \$ 150,000 \\\hline 5 & \$ 750,000 \\\hline\end{array}$$

• A)3.7 years
• B)4.1 years
• C)5.0 years
• D)4.8 years

---

Definitions:

Low-Income Developing

A term used to describe countries with lower levels of income and economic development in comparison to global averages.

Annual Per Capita Income

The average income earned per person in a given area in a specified year, calculated by dividing the area's total income by its population.

Democratic Republic

A form of government in which representatives elected by the people make and enforce laws and policies, but the head of state is usually a president.

Low-Income Developing

Refers to countries with low levels of income per capita, often characterized by limited economic development and facing challenges in poverty, health, and education.