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

question 21

Multiple Choice

Suppose your firm is considering investing in a project with the cash flows shown as follows, that the required rate of return on projects of this risk class is 10 percent, and that the maximum allowable payback and discounted payback statistics for the project are three and a half and four and a half years, respectively. Use the discounted payback decision to evaluate this project; should it be accepted or rejected? $$\begin{array} { l c c c c c c c } \text { Time } & 0 & 1 & 2 & 3 & 4 & 5 & 6 \\\hline \text { Cash Flow } & - \$ 5,000 & \$ 1,200 & \$ 1,400 & \$ 1,600 & \$ 1,600 & \$ 1,100 & \$ 2,000 \\\hline\end{array}$$

• A)Discounted payback = 4.25 years; accept the project
• B)Discounted payback = 3.50 years; accept the project
• C)Discounted payback > 5 years; reject the project
• D)Discounted payback = 4.67 years; reject the project

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Definitions:

Racial Stereotypes

Generalizations or assumptions about the characteristics, attributes, and behaviors of members of a certain racial group.

Disagreement

A condition or situation in which there is a lack of consensus or approval between two or more parties.

Conflict

A situation or process in which there is a struggle between opposing forces or interests, often resulting in physical or emotional tension.

Self-serving Bias

A cognitive bias that involves interpreting situations in a way that benefits oneself or assigning blame to external factors for personal failures and challenges.