Janice Is Considering an Investment Costing $102,500 with Cash Flows

question 67

Multiple Choice

Janice is considering an investment costing $102,500 with cash flows of $9,800 in Year 2,$48,700 in Year 3,and $82,900 in Year 4.The discount rate is 9 percent and the required discounted payback period is 2.5 years.Should this project be accepted or rejected? What is the discounted payback period?

• A)Accepted;2.82 years
• B)Accepted;3.96 years
• C)Accepted;3.09 years
• D)Rejected;2.82 years
• E)Rejected;3.96 years

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Definitions:

Net Income

A metric indicating the amount of earnings left after the subtraction of all expenses, including taxes and operating expenses, reflecting a company's profitability.

Inventory

Items held for sale in the ordinary course of business, as well as supplies and raw materials intended for use in producing goods for sale.

Operating Activities

Business activities that are directly related to the production and delivery of goods and services, generating revenue.

Cash Flow

The net amount of cash and cash-equivalents moving into and out of a business, crucial for assessing the liquidity of an entity.