Project Black Swan Requires an Initial Investment of $115,000

question 88

Multiple Choice

Project Black Swan requires an initial investment of $115,000. It has positive cash flows of $140,000 for each of the next two years. Because of major demolition and environmental clean-up costs, cash flow for the third and final year of the project is $(170,000) . The company accepts all projects with a payback period of 2 years or less.

• A) The payback rule would reject this project because of its risks are too high.
• B) The payback rule would reject this project because all negative cash flows are added together.
• C) If strictly applied, the payback rule would reject this project.
• D) If strictly applied, the payback rule would accept this project.

---

Definitions:

Swayback

A postural condition characterized by an exaggerated inward curve of the lower back, leading to a forward tilting of the pelvis.

Spoon Nails

A nail disorder characterized by a concave, spoon-like shape of the fingernails or toenails, it can indicate iron deficiency or other health issues.

Venous Problems

Medical issues related to the veins, which may include conditions like varicose veins, venous insufficiency, or deep vein thrombosis.

Lower Extremity

Refers to the portion of the body that includes the legs, from the hips to the toes.