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

question 109

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.
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

---

Definitions:

Order Cycle Time

The total time taken from the placement of an order to the delivery of the product to the customer.

Warehouse Shipment

The process of goods being shipped out from a warehouse to the destination specified by the order or client.

Reorders

refers to the process of placing additional orders for goods or services that a customer or business has previously purchased or used.

Supplier-Managed Inventory

A supply chain arrangement where the supplier assumes responsibility for managing inventory levels at the customer's premises, based on agreed parameters.