Acme,Inc.is considering a four-year project that has initial outlay or cost of $100,000.The respective cash inflows for years 1,2,3 and 4 are: $50,000,$40,000,$30,000 and $20,000.Acme uses the discounted payback period method,and has a discount rate of 11.50%.Will Acme accept the project if it's payback period is 38 months?
A)Yes,because it pays back in less than 38 months.
B)No,because it pays back in over 38 months.
C)Yes,because it pays back in under 37 months.
D)No,because it pays back in over 37 months.

Question

Quizplus · Accepted Answer

The discounted payback period is 36.97 months, which is less than 38 months. Therefore, Acme will accept the project.

Acme,Incis Considering a Four-Year Project That Has Initial Outlay or Cost