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, PE, are under consideration. Their anticipated cash flows are listed in the following table. If Becker uses a discount rate of 4% on these projects, are they accepted or rejected? If it uses a discount rate of 8%? 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 4%, the cash outflow for project Ris: Select the best response.) i Data Table - X O A. not fully recovered in four years, so reject. OB. fully recovered in 4 years, so accept. O C. fully recovered in 5 years, so accept O D. fully recovered in 3 years, so reject. (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 Project R $22,000 $4,400 $6,600 $8,800 $11,000 Projects $14,000 $7,000 $5,600 $4,200 $2,800 Print Done Click to select your answer and then click Check Answer. 6 parts Clear All Check Answer O remaining

Answer 1

Hello Sir/ Mam

Your required answer is OPTION B : fully recovered in year 4, so accept

Time	Outflows	PVF	PV	Cumulative CFs
0	-$22,000.00	1.0000	-$22,000.00	-$22,000.00
1	$4,400.00	0.9615	$4,230.77	-$17,769.23
2	$6,600.00	0.9246	$6,102.07	-$11,667.16
3	$8,800.00	0.8890	$7,823.17	-$3,843.99
4	$11,000.00	0.8548	$9,402.85	$5,558.85

I hope this solves your doubt.

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