A project cost $160 dollars today and has expected cash flows of $100 per year forever, beginning one year from today. What is the project's payback and discounted payback periods if the discount rate is 22%?

Managerial Economics: A Problem Solving Approach
5th Edition
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Chapter5: Investment Decisions: Look Ahead And Reason Back
Section: Chapter Questions
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A project cost $160 dollars today and
has expected cash flows of $100 per
year forever, beginning one year from
today. What is the project's payback and
discounted payback periods if the discount
rate is 22%?
A. Payback period is 2 years and
discounted payback period is 3 years
B. Payback period is 3 years and
discounted payback period is 3 years
C. Payback period is 2 years and
discounted payback period is 2 years
D. Payback period is 3 years and
discounted payback period is 4 years
Transcribed Image Text:A project cost $160 dollars today and has expected cash flows of $100 per year forever, beginning one year from today. What is the project's payback and discounted payback periods if the discount rate is 22%? A. Payback period is 2 years and discounted payback period is 3 years B. Payback period is 3 years and discounted payback period is 3 years C. Payback period is 2 years and discounted payback period is 2 years D. Payback period is 3 years and discounted payback period is 4 years
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