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

question 28

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 three and a half years,respectively.Use the payback decision to evaluate this project; should it be accepted or rejected?

• A) Payback = 4.90 years; reject
• B) Payback = 4.40 years; reject
• C) Payback = 5.80 years; reject
• D) Payback > 6.00 years; reject

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Definitions:

Reason

The mental capacity to logically identify, analyze, and integrate information to form conclusions or judgments.

Cultural Relativist

Someone who believes that moral and ethical systems, which vary from culture to culture, are all equally valid and no one system is really "better" than another.

Morally Required

Actions or behaviors that are considered necessary according to ethical or moral principles.

Culture

The shared beliefs, practices, norms, and values of a group of people or society.