Suppose Your Firm Is Considering Investing in a Project with the Cash

question 104

Multiple Choice

Suppose your firm is considering investing in a project with the cash flows shown below, that the required rate of return on projects of this risk class is 8 percent, and that the maximum allowable payback and discounted payback statistics for the project are 3.5 and 4.5 years, respectively. Use the payback decision to evaluate this project; should it be accepted or rejected?

• A) Payback = 4.44 years; reject
• B) Payback = 3.44 years; accept
• C) Payback = 3.54 years; reject
• D) Payback = 3.24 years; reject

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Definitions:

Ebbinghaus Forgetting Curve

A model depicting the decrease in the ability to recall information over time, suggesting that memory fades rapidly initially, then levels off.

Memory Trace

A theoretical concept referring to the physical change in the brain that represents a storage of knowledge.

Gradual Loss

A slow diminution or decline in value, quality, or quantity over time.

Anterograde Amnesia

A condition where a person is unable to form new memories after the event that caused the amnesia, although long-term memories from before the event remain intact.