Question

Discounted payback period. Becker, Inc. uses the discounted payback period for projects costing less than $25,000 and has a cutoff period of four years for these small-value projects. Two projects, R and S, in the following table, B are under consideration. Their anticipated cash flows are listed in the following table. If Becker uses a discount rate of 6% on these projects, are they accepted or rejected? If it uses a discount rate of 12%? A discount rate of 18%? Why is it necessary to look at only the first four years of the projects' cash flows? With a discount rate of 6%, the cash outflow for project Ris: (Select the best response.) O A. fully recovered in 4 years, so accept. O B. not fully recovered in four years, so reject. O C. fully recovered in 3 years, so reject. OD. fully recovered in 5 years, so accept i Data Table - X (Click on the following icon in order to copy its contents into a spreadsheet.) Cash Flow Initial Cost Cash flow year 1 Cash flow year 2 Cash flow year 3 Cash flow year 4 L Project $21,000 $4,200 $6.300 $8,400 $10,500 Projects $17.000 $6,500 $6,800 $5,100 $3,400 Print Done

Answer 1

Hello Sir/ Mam

YOUR REQUIRED ANSWER IS OPTION A : Fully recovered in 4 years, so accept

Cashflow analysis for Project R:

Time	Outflows	PVF	PV	Cumulative CFs
0	-$21,000.00	1.0000	-$21,000.00	-$21,000.00
1	$4,200.00	0.9434	$3,962.26	-$17,037.74
2	$6,300.00	0.8900	$5,606.98	-$11,430.76
3	$8,400.00	0.8396	$7,052.80	-$4,377.96
4	$10,500.00	0.7921	$8,316.98	$3,939.03

As the project cost is fully recovered @6% within 4 years, hence accept the project.

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