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ere, select t then , and drag to the Favorites Bar folder. Or import from another browser. Import favorites Week 4 Homework Assignment 6 Compute the payback statistic for Project B if the appropriate cost of capital is 12 percent and the maximum allowable payback period is three years. (If the project never pays back, then enter a "O" (zero).) Project Time: cash flow : points -$11,600 $3,41e $4,3?? $1,64e se $1,129 eBook Hint Ask Print Reterences Should the project be accepted or rejected? O accepted O rejected

Explanation / Answer

Cumulative cash flow for year 0 = -11,600

Cumulative cash flow for year 1 = -11,600 + 3,410 = -8,190

Cumulative cash flow for year 2 = -8,190 + 4,300 = -3,890

Cumulative cash flow for year 3 =  -3,890 + 1,640 = -2,250

Cumulative cash flow for year 4 = -2,250 + 0 = -2,250

Cumulative cash flow for year 5 = -2,250 + 1,120 = -1,130

The project never pays back. Therefore payback is 0 years

Rejected as the allowable payback is 3 years

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