Compute the Payback Statistic for Project Y and Recommend Whether

question 55

Multiple Choice

Compute the payback statistic for Project Y 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 11 percent and the maximum allowable payback is one year.

• A) 1.25 years, reject
• B) 1.25 years, accept
• C) 1.33 years, accept
• D) 2.25 years, accept

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Definitions:

Overall

Encompassing everything or in general; a term not specific to economics but often used to imply a holistic or comprehensive perspective.

Substantially

To a great or significant extent, often used to signify the importance, size, or degree of something.

Positive Trade Balance

A situation where the value of a country's exports exceeds the value of its imports, also known as a trade surplus.

Merchandise

Goods produced for the purpose of being sold, typically referred to in the context of retail sales and trade.