Question

Suppose your firm is considering investing in a project with the cash flows shown below, that the required rate of return on projects of this risk class is 13 percent, and that the maximum allowable payback and discounted payback statistic for the project are 2 and 3 years, respectively.

Time | 0 | 1 | 2 | 3 | 4 | 5 | 6 |

Cash Flow | -970 | 170 | 430 | 630 | 630 | 230 |
630 |

Use the NPV decision rule to evaluate this project; should it be accepted or rejected?

a. $767.64, accept

b. $-440.67, reject

c. $1,737.64, accept

d.$679.33, accept

Answer #1

Answer:- Option (a) $767.64, accept

Explanation:-

Suppose your firm is considering investing in a project with the
cash flows shown below, that the required rate of return on
projects of this risk class is 12 percent, and that the maximum
allowable payback and discounted payback statistic for the project
are 2 and 3 years, respectively.
Time
0
1
2
3
4
5
6
Cash Flow
-980
180
420
620
620
220
620
Use the NPV decision rule to evaluate this project; should it be
accepted or...

Suppose your firm is considering investing in a project with the
cash flows shown below, that the required rate of return on
projects of this risk class is 14 percent, and that the maximum
allowable payback and discounted payback statistic for the project
are 2 and 3 years, respectively.
Time 0 1 2 3 4 5 6
Cash Flow -1,010 110 490 690 690 290 690
Use the NPV decision rule to evaluate this project; should it be
accepted or...

Suppose your firm is considering investing in a project with the
cash flows shown below, that the required rate of return on
projects of this risk class is 12 percent, and that the maximum
allowable payback and discounted payback statistic for the project
are 2 and 3 years, respectively.
Time
0
1
2
3
4
5
6
Cash Flow
-1,030
130
470
670
670
270
670
Use the discounted payback decision rule to evaluate this project;
should it be accepted...

Suppose your firm is considering investing in a project with the
cash flows shown below, that the required rate of return on
projects of this risk class is 12 percent, and that the maximum
allowable payback and discounted payback statistic for the project
are 2 and 3 years, respectively.
Time
0
1
2
3
4
5
6
Cash Flow
-1,030
130
470
670
670
270
670
Use the discounted payback decision rule to evaluate this project;
should it be accepted...

Suppose your firm is considering investing in a project with the
cash flows shown below, that the required rate of return on
projects of this risk class is 12 percent, and that the maximum
allowable payback and discounted payback statistic for the project
are 2 and 3 years, respectively.
Time
0
1
2
3
4
5
6
Cash Flow
-1,150
30
570
770
770
370
770
Use the discounted payback decision rule to evaluate this project;
should it be accepted...

Suppose your firm is considering investing in a project with the
cash flows shown below, that the required rate of return on
projects of this risk class is 12 percent, and that the maximum
allowable payback and discounted payback statistic for the project
are 2 and 3 years, respectively. Time 0 1 2 3 4 5 6 Cash Flow
-1,150 30 570 770 770 370 770 Use the discounted payback decision
rule to evaluate this project; should it be accepted...

Suppose your firm is considering investing in a project with the
cash flows shown below, that the required rate of return on
projects of this risk class is 10 percent, and that the maximum
allowable payback and discounted payback statistic for the project
are 2 and 3 years, respectively.
Time
0
1
2
3
4
5
6
Cash Flow
-1,070
100
500
700
700
300
700
Use the payback decision rule to evaluate this project; should
it be accepted or...

Suppose your firm is considering investing in a project with the
cash flows shown below, that the required rate of return on
projects of this risk class is 12 percent, and that the maximum
allowable payback and discounted payback statistic for the project
are 2 and 3 years, respectively.
Time
0
1
2
3
4
5
6
Cash Flow
-980
180
420
620
620
220
620
Use the NPV decision rule to evaluate this project; should it be
accepted or...

Suppose your firm is considering investing in a project with the
cash flows shown below, that the required rate of return on
projects of this risk class is 11 percent, and that the maximum
allowable payback and discounted payback statistic for the project
are 2 and 3 years, respectively.
Time 0 1 2 3 4 5 6
Cash Flow -990 190 410 610 610 210 610
Use the NPV decision rule to evaluate this project; should it be
accepted or...

Suppose your firm is considering investing in a project with the
cash flows shown below, that the required rate of return on
projects of this risk class is 11 percent, and that the maximum
allowable payback and discounted payback statistics for your
company are 2.5 and 3.0 years, respectively.
Time:
0
1
2
3
4
5
Cash Flow:
–$357,000
$65,600
$83,800
$140,800
$121,800
$81,000
Use the NPV decision rule to evaluate this project.
Should it be accepted or rejected?

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