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

question 58

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 8 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 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:

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