Question

A project has cash flows of –$78,400, $22,500, $37,300, and $53,200 for Years 0 to 3,...

A project has cash flows of –$78,400, $22,500, $37,300, and $53,200 for Years 0 to 3, respectively. The required rate of return is 4 percent. The regular payback for this project is ________ years, while the discounted payback for this project is ______ years. Assuming that the preset (cutoff) rate is 2.50 years, in both cases you should __________ the project. Select one:

A. 1.46; 1.53; accept

B. 2.54; 2.89; reject

C. 2.35; 2.89; reject

D. 2.35; 2.47; accept

E. 2.35; 2.89; reject

Homework Answers

Answer #1

Ans D. 2.35; 2.47; accept

Since payback and discounting payback period is less than 2.50 years, the project must be accepted.

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