Janice is considering an investment costing $65,500 with cash flows of $48,700 in Year 2,$36,500 in Year 3,and $19,900 in Year 4.The discount rate is 11 percent,and the required discounted payback period is 3 years.Should this project be accepted or rejected? What is the discounted payback period?
A)Rejected 2.82 years
B)Accepted; 1.97 years
C)Accepted; 2.38 years
D)Rejected; 3.77 years
E)Accepted; 2.97 years

Question

Quizplus · Accepted Answer

Discounted cash flow Year 1 = $0 Discounted cash flow Year 2 = $48,700 / 1.11² = $39,526.01 Discounted cash flow Year 3 = $36,500 / 1.11³ = $26,688.49 Discounted cash flow Year 4 = $19,900 / 1.11⁴ = $13,108.75 Discounted payback period = 2 + ($65,500 - 0 - $39,526.01)/ $26,688.49)= 2.97 years; Accept

Janice Is Considering an Investment Costing $65,500 with Cash Flows