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  3. 7. suppose your firm is considering investing in a

7. Suppose your firm is considering investing in a project with the cash flows shown below,...

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Finance

7. Suppose your firm is considering investing in a project withthe cash flows shown below, that the required rate of return onprojects of this risk class is 12 percent, and that the maximumallowable payback and discounted payback statistic for the projectare 2 and 3 years, respectively.

  Time0123456
  Cash Flow-1,10080520720720320

720

Use the discounted payback decision rule to evaluate thisproject; should it be accepted or rejected?

  • 3.22 years, reject

  • 3.29 years, reject

  • 2.78 years, accept

  • 2.69 years, accept

Answer & Explanation Solved by verified expert
3.6 Ratings (376 Votes)
Discounted Payback Period for the Project Year Cash Flows Present Value Factor at 12 Discounted Cash Flow Cumulative net discounted Cash flow 0 110000 100000 110000 110000 1 8000 089286 7143 102857 2 52000 079719    See Answer
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