Compute the Discounted Payback Statistic for Project X and Recommend

question 104

Multiple Choice

Compute the discounted payback statistic for Project X 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 10 percent and the maximum allowable discounted payback is three years.

• A) 2.49 years, accept
• B) 2.98 years, accept
• C) 3.49 years, reject
• D) 4.98 years, reject

---

Definitions:

Tax

A mandatory monetary fee or different form of charge placed on a taxpayer by a government entity to finance government operations and assorted public expenses.

Good

A material item or service that satisfies a want or need; can be economic (having monetary value) or free (like air) but is essential for transactions in the market.

Total Surplus

The sum of consumer surplus and producer surplus in a market, representing the total benefits that buyers and sellers receive from participating in the market.

Tax

A compulsory financial charge or some other type of levy imposed upon a taxpayer by a governmental organization in order to fund various public expenditures.