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 12 percent, and that the maximum allowable payback and discounted payback statistic for the project are two and two and a half years, respectively. $$\begin{array} { l l l l l l l } \text { Time } & 0 & 1 & 2 & 3 & 4 & 5 \\\text { Cash Flow } & - 125,000 & 65,000 & 78,000 & 105,000 & 105,000 & 25,000\end{array}$$ Use the payback decision rule to evaluate this project; should it be accepted or rejected?

• A)0.23 years, accept
• B)1.77 years, accept
• C)2 years, accept
• D)4.33 years, reject

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Definitions:

Positron Emission Tomography

A medical imaging technique that produces a three-dimensional image or picture of functional processes in the body.

Computerised Tomography

A diagnostic imaging procedure using a series of computer-processed combinations of many X-ray measurements taken from different angles to produce cross-sectional images of specific areas of a scanned object.

Magnetic Resonance Imaging

A medical imaging technique used in radiology to form pictures of the anatomy and the physiological processes of the body.

Ventricles

In the context of the brain, ventricles are interconnected, fluid-filled cavities that produce and store cerebrospinal fluid, providing cushioning for the brain.