Question

Compute the Payback statistic for Project A given the following cash flows and decide whether the firm should accept or reject the project with the cash flows shown below where the cost of capital is 12 % and the maximum allowable payback is 3 years. Time 0 1 2 3 4 5 Cash Flow ($92,000) $42,999 $45,668 $38,554 $36,778 $47,000 The payback is less than 3 years; the project should be accepted. The payback is greater than 3 years but less than 5 years; the project should be accepted. The payback is greater than 3 but less than 5 years; the project should be rejected. The project will never achieve payback; the project should be rejected.

          Compute the Payback statistic for Project A given the following cash flows and decide whether the firm should accept or reject the project with the cash flows shown below where the cost of capital is 12 % and the maximum allowable payback is 3 years.

Time 0 1 2 3 4 5
Cash Flow ($92,000) $42,999 $45,668 $38,554 $36,778 $47,000

The payback is less than 3 years; the project should be accepted.
The payback is greater than 3 years but less than 5 years; the project should be accepted.
The payback is greater than 3 but less than 5 years; the project should be rejected.
The project will never achieve payback; the project should be rejected.

Compute the Payback statistic for Project A given the following cash flows and decide whether the firm should accept or reject the project with the cash flows shown below where the cost of capital is 12 % and the maximum allowable payback is 3 years.

Time 0 1 2 3 4 5
Cash Flow (92,000)42,999 45,66838,554 36,77847,000

The payback is less than 3 years; the project should be accepted.
The payback is greater than 3 years but less than 5 years; the project should be accepted.
The payback is greater than 3 but less than 5 years; the project should be rejected.
The project will never achieve payback; the project should be rejected.

Added by William W.

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