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Compute the payback statistics (Not discounted) for Project X and recommend whether the firm should accept...

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Finance

Compute the payback statistics (Not discounted) forProject X and recommend whether the firm should accept or rejectthe project with the cash flows shown as follows if the appropriarecost of capital is 10 percent and the maximum allowable paybackis
five years.

Time:                 0       1     2       3        4       5
Cash flow:       -75   -75    0     100    75     50

a. 3.67 years, accept
b. 4.67 years, accept
c. 3.67 years, reject
d. 4.67 years, reject

Answer & Explanation Solved by verified expert
3.6 Ratings (583 Votes)
Payback Period calculation gives us an idea that how long it will take for a project to recover the initial investment We can use cumulative cash flow table to see that when the    See Answer
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