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

question 18

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

• A) Discounted payback = 4.29 years; accept the project
• B) Discounted payback = 3.97 years; accept the project
• C) Discounted payback > 4.5 years; reject the project
• D) Discounted payback = 4.4 years; accept the project

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Definitions:

Expressed

Expressed in a straightforward or obvious manner; explicitly revealed.

Proposition Not-p

A proposition that negates another proposition, symbolically represented as ¬p.

Contraries

Statements, ideas, or actions that are opposed to each other; in logic, two propositions are contraries if they cannot both be true but can both be false.

Negated

Made ineffective or invalidated; in logic, a proposition that denies or contradicts another proposition.