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

question 89

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 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.

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Definitions:

Yearly Donations

The total sum of money given by donors to an organization within a year.

Thousands of Dollars

A unit of measure indicating the amount in multiples of one thousand dollars, often used to simplify financial figures.

Y-Intercept

The point where a line crosses the y-axis on a graph.

Least Squares Line

A line of best fit determined by minimizing the sum of the squares of the vertical distances of the points from the line.