Which of the following statements about the evaluation of an investment having uneven cash flows using...
Which of the following statements about the evaluation of an investment having uneven cash flows using the payback method is correct?
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It CANNOT be done.
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It can be done only by matching cash inflows and investment outflows on a year-by-year basis.
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It will produce essentially the same results as those obtained through the use of discounted cash flow techniques.
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It requires the use of a sophisticated calculator or computer software.
Homework Answers
| It can be done only by matching cash inflows and investment outflows on a year-by-year basis. |
| Payback period is the time period at which the cost of investment is recovered. |
| While calculating payback period for an investment having uneven cash flows, cumulative cash flows should be calculated and payback period would be when cumulative cash flows equal zero. |
| Option B is correct |
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permanently. The initial investment will cost $318,000. The firm
requires a 15.5 percent rate of return and has a required
discounted payback period of three years. Should the project be
accepted? Why or why not? show all work
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