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You are evaluating a project for your company. The initial outlay for the project is $5,000,000,...

You are evaluating a project for your company. The initial outlay for the project is $5,000,000, and free cash flows for the project are $1,000,000, $3,000,000, $3,000,000, $4,000,000 and $4,000,000.  For risk analysis, you utilize the Payback and Discounted Payback methods to trigger increased risk scrutiny.  Your standard is, any project that goes longer than 3 years under either metric will go through these increased risk tests.  If your required rate is 12%, does this project qualify for increased scrutiny? Any problems with this approach?

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