A Project Manager Is Using the Payback Method to Make

question 78

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 discounted payback of a project that has cash flows as shown in the table? $$\begin{array} { | l | l | } \hline \text { Year } & \text { Cash Flow } \\\hline 0 & -\$ 100,000 \\\hline 1 & \$ 20,000 \\\hline 2 & \$ 50,000 \\\hline 3 & \$ 50,000 \\\hline 4 & \$ 25,000 \\\hline 5 & \$ 500,000 \\\hline\end{array}$$

• A)3.4 years
• B)2.6 years
• C)5.0 years
• D)4.2 years

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