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

question 6

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 8 percent,and that the maximum allowable payback and discounted payback statistic for the project are three and three and a half years,respectively. Use the PI decision rule to evaluate this project; should it be accepted or rejected?

• A) −0.39 percent, reject
• B) 0.39 percent, accept
• C) 38.88 percent, reject
• D) 38.88 percent, accept

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