A Company Is Considering a Proposal to Invest $40,000 in a Project

question 177

Essay

A company is considering a proposal to invest $40,000 in a project that would provide the following net cash flows:
$$\begin{array} { l l } \text { Year 1 } & \$ 6,500 \\\text { Year 2 } & 12,700 \\\text { Year 3 } & 15,000 \\\text { Year 4 } & 12,800\end{array}$$ $$\begin{array} { l l } \text { Year 1 } & \$ 6,500 \\\text { Year 2 } & 12,700 \\\text { Year 3 } & 15,000 \\\text { Year 4 } & 12,800\end{array}$$ Compute the project's payback period.

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Definitions:

Normal Probability Distribution

A statistical function that describes all the possible values and likelihoods that a random variable can take within a given range, characterized by its bell-shaped curve, symmetric about the mean.

Standard Deviation

A statistical metric that quantifies the dispersion or variability of a dataset relative to its mean.

Mean

The average of a set of numbers, calculated by dividing the sum of the values by the number of values.

Standard Normal Variable

A standard normal variable is a random variable that follows a normal distribution with a mean of zero and a standard deviation of one.