You are analyzing a project and have gathered the following data: $$\begin{array} { c r c }
\frac { \text { Year } } { 0 } & \frac { \text { Cash flow } } { } & \
1 & - \$ 175,000 & \
2 & \$ 56,400 & \
3 & \$ 61,800 & \
4 & \$ 72,000 & \
\text { Required payback period } & 2.5 \text { years } \
\text { Required AAR } & 11.5 \text { percent } \
\text { Required return } & 14.5 \text { percent }
\end{array}$$ Based on the payback period of _____ years for this project,you should _____ the project.
A)2.79; accept
B)3.79; accept
C)2.46; reject
D)2.79; reject
E)3.79; reject

Question

You are analyzing a project and have gathered the following data: $$\begin{array} { c r c } 
\frac { \text { Year } } { 0 } & \frac { \text { Cash flow } } { } & \
1 & - \$ 175,000 & \
2 & \$ 56,400 & \
3 & \$ 61,800 & \
4 & \$ 72,000 & \
\text { Required payback period } & 2.5 \text { years } \
\text { Required AAR } & 11.5 \text { percent } \
\text { Required return } & 14.5 \text { percent }
\end{array}$$ Based on the payback period of _____ years for this project,you should _____ the project.
A)2.79; accept
B)3.79; accept
C)2.46; reject
D)2.79; reject
E)3.79; reject

Quizplus · Accepted Answer

The payback period is 2.79 years, which is longer than the required payback period of 2.5 years, so the project should be rejected.

You Are Analyzing a Project and Have Gathered the Following