Should Long Glass company accept a new project if its maximum payback is 3.5 yea
ID: 2745629 • Letter: S
Question
Should Long Glass company accept a new project if its maximum payback is 3.5 years and its initial after-tax cost is $5,000,000 and it is expected to provide after-tax operating cash inflows of $1,800,000 in year 1, $1,900,000 in year 2, $700,000 in year 3, and $1,800,000 in year 4?
- Yes, since the payback period of the project is less than the maximum acceptable payback period.
- No, since the payback period of the project is more than the maximum acceptable payback period.
- Yes, since the risk exposure of the project is less than the maximum acceptable risk exposure.
- No, since the risk exposure of the project is more than the maximum acceptable risk exposure.
- Yes, since the payback period of the project is less than the maximum acceptable payback period.
- No, since the payback period of the project is more than the maximum acceptable payback period.
- Yes, since the risk exposure of the project is less than the maximum acceptable risk exposure.
- No, since the risk exposure of the project is more than the maximum acceptable risk exposure.
Explanation / Answer
Pay back period:
the time required for an investment to recover its initial outlay in terms of profits or savings. If the pay back period is less than the the maximum acceptable payback period.then project can accepted.Here maximum acceptable payback period is nothig but total life of the project.If the pay back period is more than the the maximum acceptable payback period.then project can not accepted. it means investment itself will not be received with in the tha time.
- Yes, since the payback period of the project is less than the maximum acceptable payback period.