Use the Following Information to Answer the Following Question

question 107

Multiple Choice

Use the following information to answer the following question.
Below are the expected after-tax cash flows for Projects Y and Z.Both projects have an initial cash outlay of $20,000 and a required rate of return of 17%.
Project Y Project Z

-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 appropriate discount rate is 10% and that the firm's tax rate is 40%.What is the project's discounted payback period?

• A)2.81 years
• B)2.33 years
• C)1.22 years
• D)The project never reaches payback.

---

Definitions:

Inventory

Refers to the goods and materials a business holds for the purpose of resale or production.

Cost Of Goods Sold

Costs that are directly related to the production of goods a company sells, encompassing expenses for labor and materials.

Profit Margin

A financial metric indicating the percentage of revenue that exceeds the cost of goods sold, highlighting the profitability of a company.

Sales

This refers to the revenue a company generates from selling goods or services in the normal course of its business.