Question

Suppose your firm is considering investing in Project W with the cash flows shown in the table, that the required rate of return on projects of this risk class is 10 percent, and that the maximum allowable payback and discounted payback statistics for the project are 3.5 and 4.5 years, respectively. Use the PI decision to evaluate this project; should it be accepted or rejected? A. PI = 1.04; reject the project B. PI = 1.04; accept the project C. PI = 0.04; reject the project D. PI = 0.96; reject the project E. PI = 0.96; accept the project

Project W Time Cash Flow 0 – $85,000 1 $12,000 2 $11,000 3 $13,000 4 $21,000 5 $31,000 6 $32,000

Answer 1