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

question 51

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 NPV decision to evaluate this project; should it be accepted or rejected? $$\begin{array} { | l | l | l | l | l | l | l | l | } \hline \text { Time } & 0 & 1 & 2 & 3 & 4 & 5 & 6 \\\hline \text { Cash } & - 85,000 & \$ 12,000 & \$ 11,000 & \$ 13,000 & \$ 21,000 & \$ 31,000 & \$ 32,000 \\ \text { Flow } & & & & & & &\\\hline\end{array}$$

• A)NPV = $1,766.55; accept the project
• B)NPV = -$892.19; reject the project
• C)NPV = $1,288.94; accept the project
• D)NPV = -$3,577.90; reject the project

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Definitions:

Cephalothorax

The fused head and thorax found in certain arthropods, such as spiders and crustaceans, which houses both sensory and motor organs.

Cephalothorax

The fused head and thorax found in certain arthropods, such as spiders and crustaceans.

Pyothorax

Accumulation of pus in the pleural cavity caused by infection, which can lead to compromised lung function and requires medical intervention.

Metathorax

The third and last of the three segments in the thorax of an insect, carrying the second pair of wings and the second pair of legs.