Suppose your firm is considering investing in a project with the cash flows shown as follows,that the required rate of return on projects of this risk class is 10 percent,and that the maximum allowable payback and discounted payback statistics for the project are three and a half and four and a half years,respectively.Use the discounted payback decision to evaluate this project; should it be accepted or rejected?
A) Discounted payback = 4.25 years; accept the project
B) Discounted payback = 3.50 years; accept the project
C) Discounted payback 5 years; reject the project
D) Discounted payback = 4.67 years; reject the project

Question

Suppose your firm is considering investing in a project with the cash flows shown as follows,that the required rate of return on projects of this risk class is 10 percent,and that the maximum allowable payback and discounted payback statistics for the project are three and a half and four and a half years,respectively.Use the discounted payback decision to evaluate this project; should it be accepted or rejected? 
A) Discounted payback = 4.25 years; accept the project 
B) Discounted payback = 3.50 years; accept the project 
C) Discounted payback > 5 years; reject the project 
D) Discounted payback = 4.67 years; reject the project

Quizplus · Accepted Answer

Find the PV of each lump sum; discount at 10 percent. Accumulate the cash flows. Discounted payback = 4 + 457.15/683.01 = 4.67 years; reject since greater than benchmark.

Suppose Your Firm Is Considering Investing in a Project with the Cash