Under which of the following decision rules will this project be accepted? Which decision rules are associated with a project rejection? Payback Rule; three year cut-off point. Discounted Payback Rule; three year cut-off point; assume that the discount rate, r=7% Internal Rate of Return Rule; 7% required internal rate of return. Net Present Value Rule.(Assume a 5% discount rate) Profitability Index Rule. (Assume a 5% discount rate) The most appropriate rule.
Under which of the following decision rules will this project be accepted? Which decision rules are associated with a project rejection? Payback Rule; three year cut-off point. Discounted Payback Rule; three year cut-off point; assume that the discount rate, r=7% Internal Rate of Return Rule; 7% required internal rate of return. Net Present Value Rule.(Assume a 5% discount rate) Profitability Index Rule. (Assume a 5% discount rate) The most appropriate rule.
Chapter10: Capital Budgeting: Decision Criteria And Real Option
Section: Chapter Questions
Problem 4P
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XYZ is considering investing in a new and cooking machine at an initial cost of $100,000. After close examination of the investment proposal, the firm’s CFO has determined that the expected after-tax cash flows from this operation for the next 5 years will be as followed:
Year Cash Flow
1 $10,000
2 $40,000
3 $40,000
4 $40,000
5 $10,000
Under which of the following decision rules will this project be accepted? Which decision rules are associated with a project rejection?
- Payback Rule; three year cut-off point.
- Discounted Payback Rule; three year cut-off point; assume that the discount rate, r=7%
Internal Rate of Return Rule; 7% required internal rate of return.Net Present Value Rule.(Assume a 5% discount rate)- Profitability Index Rule. (Assume a 5% discount rate)
- The most appropriate rule.
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