Which of the following values comes closest to the payback of a project that requires an initial investment of $34, produces cash flows of $12 for 5 consecutive years beginning at the end of year 1, and provides a final cash flow at the end of year 6 of $100? The project's required rate of return is 13%. Select one: a. 3 years b. 4 years c. Undefined-there is no payback for this project. d. 6 years e. 5 years
Which of the following values comes closest to the payback of a project that requires an initial investment of $34, produces cash flows of $12 for 5 consecutive years beginning at the end of year 1, and provides a final cash flow at the end of year 6 of $100? The project's required rate of return is 13%. Select one: a. 3 years b. 4 years c. Undefined-there is no payback for this project. d. 6 years e. 5 years
Chapter10: Capital Budgeting: Decision Criteria And Real Option
Section: Chapter Questions
Problem 21P
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Question
Which of the following values comes closest to the payback of a project that requires an initial investment of $34, produces cash flows of $12 for 5 consecutive years beginning at the end of year 1, and provides a final cash flow at the end of year 6 of $100? The project's required rate of return is 13%.
Select one:
a. 3 years
b. 4 years
c. Undefined-there is no payback for this project.
d. 6 years
e. 5 years
Expert Solution
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Step 1
here below is the table to find no of years
year | cashflows | cumulative cashflows |
0 | 34 | (34) |
1 | 12 | (22) |
2 | 12 | (10) |
3 | 12 | 2 |
4 | 12 | 14 |
5 | 12 | 26 |
6 | 100 | 126 |
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