Compute the Discounted Payback statistic for Project X and recommend whether the firm should accept or reject the project with the cash flows shown below if the appropriate cost of capital is 14 percent and the maximum allowable discounted payback is 3 years. Time: Cash flow: 3.46 years, reject 2.46 years, accept O2.85 years, accept O 4.85 years, reject 0 -960 1 360 2 620 3 4 540 440 5 290

Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter12: Capital Budgeting: Decision Criteria
Section: Chapter Questions
Problem 13P
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Compute the Discounted Payback statistic for Project X and recommend whether the firm should accept or reject the project with the
cash flows shown below if the appropriate cost of capital is 14 percent and the maximum allowable discounted payback is 3 years.
Time:
Cash flow:
3.46 years, reject
2.46 years, accept
O2.85 years, accept
O 4.85 years, reject
0
-960
1
360
2
620
3
4
540
440
5
290
Transcribed Image Text:Compute the Discounted Payback statistic for Project X and recommend whether the firm should accept or reject the project with the cash flows shown below if the appropriate cost of capital is 14 percent and the maximum allowable discounted payback is 3 years. Time: Cash flow: 3.46 years, reject 2.46 years, accept O2.85 years, accept O 4.85 years, reject 0 -960 1 360 2 620 3 4 540 440 5 290
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