MacHinery Manufacturing Company Is Considering a Three-Year Project That Has

question 73

Multiple Choice

MacHinery Manufacturing Company is considering a three-year project that has a cost of $75,000. The project will generate after-tax cash flows of $33,100 in Year 1, $31,500 in Year 2, and $31,200 in Year 3. Assume that the firm's proper rate of discount is 10% and that the firm's tax rate is 40%. What is the project's payback?

• A) 0.33 years
• B) 1.22 years
• C) 2.33 years
• D) Three years

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Definitions:

Formal Investment

The act of putting money into financial schemes, shares, property, or a commercial venture with the expectation of achieving a profit, typically through an official or regulated framework.

Bootstrapping

Starting a business with minimal financial resources and relying on one's own efforts and funds rather than seeking significant external funding.

Customer Base

The group of customers who repeatedly purchase the goods or services of a business, representing the business's main source of revenue.

Crowdfunding

Securing capital for a project or business by requesting small financial contributions from a large group of individuals, mainly via online channels.