Question

Checkm Suppose your frm 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 8 percent, and that the maximum allowable payback and discounted payback statistics for the project are 25 and 3.5 years, respectively Cash flow: -54.600 $1,120 $2,320 31,520 1.820 51.320 1.120 Use the payback decision rule to evaluate this project (Round your answer to 2 decimal places.) Payback years Should it be accepted or rejected? rejected accepted

Answer 1

Payback Period is the time in which initial investment offsets cash inflow

Payback Period = 1(1,120) + 1(2,320) + 1(360/1,520)

Payback Period = 2.24 years