Compute the Payback Statistic for Project Y and Recommend Whether $$\begin{array} { l l l l l l l } \text { Time: } & 0 & 1 & 2 & 3 & 4 & 5 \\\text { Cash flow: } & - 100 & 75 & 100 & 300 & 75 & 200\end{array}$$

question 48

Multiple Choice

Compute the payback statistic for Project Y and recommend whether the firm should accept or reject the project with the cash flows shown as follows if the appropriate cost of capital is 11 percent and the maximum allowable payback is one year. $$\begin{array} { l l l l l l l } \text { Time: } & 0 & 1 & 2 & 3 & 4 & 5 \\\text { Cash flow: } & - 100 & 75 & 100 & 300 & 75 & 200\end{array}$$

• A)1.25 years, reject
• B)1.25 years, accept
• C)1.33 years, accept
• D)2.25 years, accept

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Definitions:

Originally Scheduled Payments

Originally scheduled payments refer to the payments planned and agreed upon at the outset of a loan or mortgage, before any adjustments or changes.

Replacement Payments

Payments made to compensate for goods or services that were faulty, damaged, or otherwise inadequate, ensuring the recipient receives what was originally contracted.

Interest Rate

A percentage that measures the amount of interest due per period, as a proportion of the amount lent, deposited, or borrowed.

Equal Payments

A series of payments of the same amount made at regular intervals for a specified period of time.