Deck 11: Investment Decision Criteria

Question 1

Capital budgeting is the decision-making process with respect to investment in working capital.

Answer 1

False

Question 2

Why is it so difficult for firms to find good investment ideas?

Answer 2

All firms are competing to maximize their value,so if an idea is obvious,many companies will pursue it at the same time.The Blackberry,for example,soon faced intense competition from any number of smart phones.Companies often find the best opportunities in areas where they have some protection from competition because they possess proprietary technology (Pfizer,Merck),strong brand loyalty (Coca Cola),or because the business is very expensive to enter (Toyota,Disney).

Question 3

Which of the following would NOT be considered a capital budgeting decision?

A)Walmart purchases inventory for resale to customers.
B)Morgan Stanley installs elevators to comply with the Americans With Disabilities Act.
C)Caterpillar replaces manufacturing equipment with more efficient new equipment.
D)Pfizer develops a new therapy and brings it to market.

Answer 3

A

Question 4

Good capital investment opportunities are most likely to exist when:

A)many firms compete to sell similar products.
B)interest rates are high and rising.
C)goods and services can be produced cheaply using readily available tools and technologies.
D)a line of business is expensive to enter and uses proprietary technology.

Question 5

Project Sigma requires an investment of $1 million and has a NPV of $10.Project Delta requires an investment of $500,000 and has a NPV of $150,000.The projects involve unrelated new product lines.

A)Both projects should be accepted because they have positive NPV's.
B)Neither project should be accepted because they might compete with one another.
C)Only project Delta should be accepted.Alpha's NPV is too low for the investment.
D)The company should look at other investment criteria,not just NPV.

Question 6

Errors resulting from a capital budgeting decision are not considered major since the consequences of such errors average out over the life of the investment.

Question 7

Competitive market forces make it imperative for a firm to have a systematic strategy for generating capital-budgeting projects.

Question 8

Project H requires an initial investment of $100,000 and the produces annual cash flows of $50,000,$40,000,and $30,000.Project T requires an initial investment of $100,000 and the produces annual cash flows of $30,000,$40,000,and $50,000.If the required rate of return is greater than 0% and the projects are mutually exclusive:

A)H will always be preferable to T.
B)T will always be preferable to H.
C)H and T are equally attractive.
D)The project rankings will change with different discount rates.

Question 9

Errors in capital budgeting decisions:

A)tend to average out over time.
B)decrease the firm's value.
C)are diminished because the time value of money makes future cash flows less important.
D)are easily reversed.

Question 10

Project H requires an initial investment of $100,000 and the produces annual cash flows of $45,000 per year for each of the next 3 years.Project T also requires an initial investment of $100,000 and produces cash flows of $30,000 in year 1,$40,000 in year 2,and $70,000 in year 3.If the discount rate is 10% and the projects are mutually exclusive:

A)Project H should be chosen.
B)Project T should be chosen.
C)H and T are equally attractive.
D)Both projects should be chosen.

Question 11

Which of the following are typical consequences of good capital budgeting decisions?

A)The firm increases in value.
B)The firm gains knowledge and experience that may be useful in future decisions.
C)Good capital budgeting decisions help a company define its core competencies.
D)All of the above.

Question 12

Central Mass Ambulance Service can purchase a new ambulance for $200,000 that will provide an annual net cash flow of $50,000 per year for five years.The salvage value of the ambulance will be $25,000.Assume the ambulance is sold at the end of year 5.Calculate the NPV of the ambulance if the required rate of return is 9%.(Round your answer to the nearest $1. )

A)$(10,731)
B)$10,731
C)$(5,517)
D)$5,517

Question 13

The size of capital investments and the difficulty in reversing them once they are made make capital-budgeting decisions very important to the firm.

Question 14

Distinguish between revenue enhancement investments,cost-reduction investments,and mandated investments.

Question 15

Which of the following is a typical capital budgeting decision?

A)Purchase of office supplies
B)Granting credit to a new customer
C)Replacement of manufacturing equipment with more modern and efficient equipment
D)Financing the firm with more long-term debt and less equity

Question 16

Central Mass Ambulance Service can purchase a new ambulance for $200,000 that will provide an annual net cash flow of $50,000 per year for five years.Calculate the NPV of the ambulance if the required rate of return is 9%.(Round your answer to the nearest $1. )

A)$50,000
B)$(5,061)
C)$(5,517)
D)$5,517

Question 17

Which of the following factors is least important to capital budgeting decisions.?

A)The time value of money
B)The risk-return tradeoff
C)Net income based on accrual accounting principles
D)Cash flows directly resulting from the decision

Question 18

Why are capital budgeting decisions among the most important decisions made by any company? Give a few examples from recent business developments.

Question 19

Fitchminster Armored Car can purchase a new vehicle for $200,000 that will provide annual net cash flow over the next five years of $40,000,$45,000,$50,000,$55,000,$60,000.The salvage value of the vehicle will be $25,000.Assume that the vehicle is sold at the end of year 5.Calculate the NPV of the ambulance if the required rate of return is 9%.(Round your answer to the nearest $1. )

A)$7,390
B)$6,048
C)$6,780
D)$19,483

Question 20

ABC Service can purchase a new assembler for $15,052 that will provide an annual net cash flow of $6,000 per year for five years.Calculate the NPV of the assembler if the required rate of return is 12%.(Round your answer to the nearest $1. )

A)$1,056
B)$4,568
C)$7,621
D)$6,577

Question 21

WSU Inc.has various options for replacing a piece of manufacturing equipment.The present value of costs for option Ell is $84,000.Option Ell has a useful life of 5 years;annual operating costs were discounted at 9%.What is the equivalent annual cost?

A)$16,800
B)$21,595.77
C)$14,035.77
D)$18,312

Question 22

A machine has a cost of $5,575,000.It will produce cash inflows of $1,825,000 (Year 1);$1,775,000 (Year 2);$1,630,000 (Year 3);$1,585,000 (Year 4);and $1,650,000 (Year 5).At a discount rate of 16.25%,the project should be:

A)accepted.
B)rejected.
C)discounted at a lower rate.
D)abandoned after the first year.

Question 23

The equivalent annual cost method is most appropriate in which of the following situations? In each case,assume that several mutually exclusive options are available.

A)Introducing a new product line
B)Adding another store to a chain of retail stores
C)Installation of federally mandated safety equipment
D)Equipment to reduce production costs

Question 24

Which of the following is the correct equation to solve for the net present value of a project.

A)NPV = CF₀ + CF_1/(1 + k)¹ + CF_2/(1 + k)²+^...CFn_/(1 + k)ⁿ
B)NPV = CF₀ + CF₁(1 + k)¹ + CF₂(1 + k)²+^...CFn(1 + k)ⁿ
C)NPV = CF₀ - CF_1/(1 + k)¹ - CF_2/(1 + k)^2-...CFn_/(1 + k)ⁿ
D)NPV = CF_1/(1 + k)¹ + CF_2/(1 + k)² +^...CFn_/(1 + k)ⁿ

Question 25

Project H requires an initial investment of $100,000 and the produces annual cash flows of $45,000 per year for each of the next 3 years.Project T also requires an initial investment of $100,000 and produces cash flows of $30,000 in year 1,$40,000 in year 2,and $70,000 in year 3.If the discount rate is 10% and the projects are not mutually exclusive:

A)Project H should be chosen.
B)Project T should be chosen.
C)H and T are equally attractive.
D)Both projects should be accepted.

Question 26

Use the following to answer the following question(s).
The information below describes a project with an initial cash outlay of $10,000 and a required return of 12%.

You have been asked to analyze a capital investment proposal.The project's cost is $2,775,000.Cash inflows are projected to be $925,000 in Year 1;$1,000,000 in Year 2;$1,000,000 in Year 3;$1,000,000 in Year 4;and $1,225,000 in Year 5.Assume that your firm discounts capital projects at 15.5%.What is the project's NPV?

A)$101,247
B)$285,106
C)$473,904
D)$582,380

Question 27

Project Eh! requires an initial investment of $50,000,and has a net present value of $12,000.Project B requires an initial investment of $100,000,and has a net present value of $13,000.The projects are proposals for increasing revenue and are not mutually exclusive.The firm should accept:

A)project Eh!.
B)project B.
C)both projects.
D)neither project.

Question 28

Use the following to answer the following question(s).
The information below describes a project with an initial cash outlay of $10,000 and a required return of 12%.

Which of the following is a correct equation to solve for the NPV of the project that has an initial outlay of $30,000,followed by incremental cash inflows in the next 3 years of $15,000,$20,000,and $30,000? Assume a discount rate of 10%.

A)NPV = - $30,000 + $15,000(1.10)¹ + $20,000(1.10)² + $30,000(1.10)³
B)NPV = - $30,000 + $15,000/(1.10)¹ + $20,000/(1.10)² + $30,000/(1.10)³
C)NPV = - $30,000 + $15,000/(1.01)^.10 + $20,000/(1.02)^.10 + $30,000/(1.03)^.10
D)NPV = - $30,000 + $15,000/(1.1)^.10 + $20,000(1.2)^.10 + $30,000(1.3)^.10

Question 29

Project H requires an initial investment of $100,000 and the produces annual cash flows of $45,000 per year for each of the next 3 years.Project T also requires an initial investment of $100,000 and produces cash flows of $30,000 in year 1,$40,000 in year 2,and $70,000 in year 3.If the discount rate increases from 10% to 16%:

A)Project T should be chosen.
B)Both projects should be rejected.
C)H and T are equally attractive.
D)The project rankings will change.

Question 30

Artie's Soccer Ball Company is considering a project with the following cash flows:
Initial outlay = $750,000
Incremental after-tax cash flows from operations Years 1-4 = $250,000 per year
Compute the NPV of this project if the company's discount rate is 12%.

A)$9,337
B)$7,758
C)$4,337
D)$2,534

Question 31

Which of the following is the correct equation to solve for the NPV of the project that has an initial outlay of $30,000,followed by three years of $20,000 in incremental cash inflow? Assume a discount rate of 10%.

A)NPV = -30,000 + (3 × 20,000)/(1.10)³
B)NPV = -$30,000 + $20,000/(1.10)¹ + $20,000/(1.10)² + $20,000/(1.10)³
C)NPV = -$30,000 + $20,000/(1.01)^.10 + $20,000/(1.02)^.10 + $20,000/(1.03)^.10
D)NPV = -$30,000 + $20,000/(1.1)^.10 + $20,000(1.2)^.10 + $20,000(1.3)^.10

Question 32

Project EH! requires an initial investment of $50,000,and has a net present value of $12,000.Project BE requires an initial investment of $100,000,and has a net present value of $13,000.The projects are mutually exclusive.The firm should accept:

A)project EH!.
B)project BE.
C)both projects.
D)neither project.

Question 33

Warchester Inc.is considering the purchase of copying equipment that will require an initial investment of $15,000 and $4,000 per year in annual operating costs over the equipment's estimated useful life of 5 years.The company will use a discount rate of 8.5%.What is the equivalent annual cost?

A)$4,000
B)$7,000
C)$6,152.51
D)$7,806.49

Question 34

Use the following to answer the following question(s).
The information below describes a project with an initial cash outlay of $10,000 and a required return of 12%.

Which of the following statements is correct?

A)The project should be accepted since its NPV is $353.87.
B)The project should be rejected since its NPV is -$353.87.
C)The project should be accepted since it has a payback of less than four years.
D)The project should be rejected since its NPV is -$23.91.

Question 35

Suppose you determine that the NPV of a project is $1,525,855.What does that mean?

A)In all cases,investing in this project would be better than investing in a project that has an NPV of $850,000.
B)The project would add value to the firm.
C)Under all conditions,the project's payback would be less than the profitability index.
D)Other investment criteria might need to be considered.

Question 36

The present value of the total costs over a five year period for Project April is $50,000.The net present value of total costs over a 4 year period for Project October is $40,000.The company uses a discount rate of 9%.Which project should it choose and why?

A)April because it has a higher NPV.
B)April because is has a higher EAC.
C)October because it has a shorter life.
D)October because it has a lower EAC.

Question 37

A machine has a cost of $5,375,000.It will produce cash inflows of $1,825,000 (Year 1);$1,775,000 (Year 2);$1,630,000 (Year 3);$1,585,000 (Year 4);and $1,650,000 (Year 5).At a discount rate of 16.25%,what is the NPV?

A)$81,724
B)$257,106
C)$416,912
D)$190,939

Question 38

Project January has a NPV of $50,000,project December has a NPV of $40,000.Which of the following circumstances could make it possible to choose December over January?

A)January has a shorter payback period.
B)The projects are mutually exclusive.
C)The projects have unequal lives.
D)The projects are mandated.

Question 39

A machine costs $1,000,has a three-year life,and has an estimated salvage value of $100.It will generate after-tax annual cash flows (ACF)of $600 a year,starting next year.If your required rate of return for the project is 10%,what is the NPV of this investment? (Round your answer to the nearest $10. )

A)$490
B)$570
C)$900
D)-$150

Question 40

Project Full Moon has an initial outlay of $30,000,followed by positive cash flows of $10,000 in year 1,$15,000 in year 2,and $15,000 in year 3.The project should be accepted if the required rate of return is:

A)greater than 0.
B)^{less than 14.6%}.
C)^{less than 16.25%}.
D)^{greater than 12%.}

Question 41

What is the NPV of a $45,000 project that is expected to have an after-tax cash flow of $14,000 for the first two years,$10,000 for the next two years,and $8,000 for the fifth year? Use a discount rate of 8%.Would you accept or reject the investment?

Question 42

A project has an initial outlay of $4,000.It has a single payoff at the end of Year 4 of $6,996.46.What is the IRR for the project (round to the nearest percent)?

A)16%
B)13%
C)21%
D)15%

Question 43

Project Black Swan requires an initial investment of $115,000.It has positive cash flows of $140,000 for each of the next two years.Because of major demolition and environmental clean-up costs,cash flow for the third and final year of the project is $(170,000).

A)All possible IRR's for this project are negative.
B)It is not possible to compute an IRR for this project.
C)The project is unacceptable at any required rate of return.
D)This project might have more than one IRR.

Question 44

Project Black Swan requires an initial investment of $115,000.It has positive cash flows of $140,000 for each of the next two years.Because of major demolition and environmental clean-up costs,cash flow for the third and final year of the project is $(170,000).The company accepts all projects with a payback period of 2 years or less.

A)The payback rule would reject this project because of its risks are too high.
B)The payback rule would reject this project because all negative cash flows are added together.
C)If strictly applied,the payback rule would reject this project.
D)If strictly applied,the payback rule would accept this project.

Question 45

Manheim Candles is considering a project with the following incremental cash flows.Assume a discount rate of 10%.
Calculate the project's MIRR.(Round to the nearest whole percentage. )

A)31%
B)47%
C)53%
D)61%

Question 46

Consider a project with the following cash flows:
Compute the profitability index if the company's discount rate is 10%.

A)15.8
B)1.61
C)1.81
D)0.62

Question 47

What is the NPV of a $45,000 project that is expected to have an after-tax cash flow of $14,000 for the first two years,$10,000 for the next two years,and $8,000 for the fifth year? Use a 10% discount rate.Would you accept the project?

Question 48

Dieyard Battery Recyclers is considering a project with the following cash flows:
Initial outlay = $13,000
Cash flows:
If the appropriate discount rate is 15%,compute the NPV of this project.

Question 49

Given the following annual net cash flows,determine the IRR to the nearest whole percent of a project with an initial outlay of $1,520.

A)48%
B)40%
C)32%
D)28%

Question 50

Your company is considering a project with the following cash flows:
Initial outlay = $1,748.80
Cash flows Years 1-6 = $500
Compute the IRR on the project.

A)9%
B)11%
C)18%
D)24%

Question 51

The higher the discount rate,the greater the importance of the early cash flows.

Question 52

Two projects are under consideration by the same company at the same time.Project Alpha has a NPV of $20 million and an estimated useful life of 10 years.Project Beta has a NPV of $12 million and also an estimated useful life of 10 years.What should the company's decision be
a)if the project's involve unrelated expansion decisions or
b)if the project's are mutually exclusive because they would have to occupy the same space?

Question 53

Compute the payback period for a project with the following cash flows,if the company's discount rate is 12%.
Initial outlay = $450
Cash flows:

A)3.43 years
B)3.17 years
C)2.88 years
D)2.6 years

Question 54

Project Black Swan requires an initial investment of $115,000.It has positive cash flows of $140,000 for each of the next two years.Because of major demolition and environmental clean-up costs,cash flow for the third and final year of the project is $(170,000).If the company 's required rate of return is 12%,the project should be:

A)rejected because the IRR is less than 12%.
B)accepted because the NPV is positive at 16%.
C)the project is unacceptable at any discount rate.
D)rejected because there may be more than one IRR.

Question 55

The IRR (to the nearest whole percent)is:

A)10%.
B)18%.
C)20%.
D)16%.

Question 56

If a project has a profitability index greater than 1,

A)the npv will also be positive.
B)the irr will be higher than the required rate of return.
C)the present value of future cash flows will exceed the amount invested in the project.
D)all of the above.

Question 57

Webley Corp.is considering two expansion options,but does not have enough capital to undertake both,Project W requires an investment of $100,000 and has an NPV of $10,000.Project D requires an investment of $80,000 and has an NPV of $8,200.If Webley use the profitability index to decide,it should:

A)choose D because it has a higher profitability index.
B)choose W because it has a higher profitability index.
C)choose D because it has a lower profitability index.
D)choose W because it has a higher profitability index.

Question 58

Project Black Swan requires an initial investment of $115,000.It has positive cash flows of $140,000 for each of the next two years.Because of major demolition and environmental clean-up costs,cash flow for the third and final year of the project is $(170,000).

A)All possible IRR's for this project are negative.
B)It is not possible to compute an IRR for this project.
C)This project might have more than one IRR,but only one MIRR.
D)The project is unacceptable at any required rate of return.This project might have more than one IRR.

Question 59

Dudster Manufacturing has 2 options for installing legally required safety equipment.Option Ex has an initial cost of $25,000 and annual operating costs over 3 years of $5,000,$5,250,$5,600.Option WYE has an initial cost of $40,000 and annual operating costs of $4,000,$4,200,$4,450,$4,750,$5,100.Whether Dudster chooses Ex or Wye,the equipment is always needed and must be replaced at the end of its useful life.Which choice is least expensive over the long run? Use a discount rate of 9%.

Question 60

The required rate of return represents the cost of capital for a project.

Question 61

Aroma Candles,Inc.is evaluating a project with the following cash flows.Calculate the IRR of the project.(Round to the nearest whole percentage. )

A)18%
B)23%
C)28%
D)33%

Question 62

Whenever the IRR on a project equals that project's required rate of return,

A)the NPV equals 0.
B)The NPV equals the initial investment.
C)The profitability index equals 0.
D)The NPV equals 1.

Question 63

A new forklift under consideration by Home Warehouse requires an initial investment of $100,000 and produces annual cash flows of $50,000,$40,000,and $30,000.Which of the following will not change if the required rate of return is increased from 10% to 12%.

A)The net present value.
B)The internal rate of return.
C)The profitability index.
D)The modified internal rate of return.

Question 64

The director of capital budgeting of South Park Development Corporation is evaluating a project that will cost $200,000;it is expected to last for 10 years and produce after-tax cash flows,including depreciation,of $44,503 per year.If the firm's cost of capital is 14% and its tax rate is 40%,what is the project's IRR?

A)8%
B)14%
C)18%
D)-5%

Question 65

Which of the following series of cash flows could have more than one IRR? (Negative cash flows are in parentheses. )

A)$(XX,XXX),$X,XXX ,$X,XXX,$X,XXX
B)$(XX,XXX),$X,XXX ,$X,XXX,$X,XXX,$(XX,XXX)
C)$X,XXX,$X,XXX ,$X,XXX,$X,XXX,$(XX,XXX)
D)$XX,XXX,$X,XXX ,$X,XXX,$X,XXX

Question 66

Kannan Enterprise has a project with an initial outlay of $40,000,followed by three years of annual incremental cash flows of $35,000.The terminal cash flow of the project is $10,000.Assuming a discount rate of 10%,which of the following is the correct equation to solve for the IRR of the project?

A)$40,000 = $35,000(1.12)¹ + $35,000(1.12)² + $45,000(1.12)³
B)$40,000 = $35,000(1 + IRR)¹ + $35,000(1+IRR)² + $45,000(1+IRR)³
C)$40,000 = $35,000/(1.12)^IRR + $35,000/(1.12)^IRR + $45,000/(1.12)^IRR
D)$40,000 = $35,000(1+IRR)^-1 + $35,000(1.IRR)^-2 + $45,000(1+IRR)^-3

Question 67

MacHinery Manufacturing Company is considering a three-year project that has a cost of $75,000.The project will generate after-tax cash flows of $33,100 in Year 1,$31,500 in Year 2,and $31,200 in Year 3.Assume that the firm's proper rate of discount is 10% and that the firm's tax rate is 40%.What is the project's payback?

A)0.33 years
B)1.22 years
C)2.33 years
D)Three years

Question 68

Project Ell requires an initial investment of $50,000 and the produces annual cash flows of $30,000,$25,000,and $15,000.Project Ess requires an initial investment of $60,000 and then produces annual cash flows of $25,000 per year for the next ten years.The company ranks projects by their payback periods.

A)Projects with unequal lives cannot be ranked using the payback method.
B)Ess will be ranked higher than Ell.
C)Ell and Ess will be ranked equally.
D)Ell will be ranked higher than Ess.

Question 69

Aroma Candles,Inc.is evaluating a project with the following cash flows.The project involves a new product that will not affect the sales of any other project.Which two methods would always lead to the same accept/reject decision for this project,regardless of the discount rate.

A)Payback and Discounted Payback
B)NPV and Payback
C)NPV and IRR
D)Discounted Payback and IRR

Question 70

Use the following information to answer the following question(s).
Below are the expected after-tax cash flows for Projects Y and Z.Both projects have an initial cash outlay of $20,000 and a required rate of return of 17%.

Payback for Project Y is:

A)two years.
B)one year.
C)three years.
D)four years.

Question 71

Use the following information to answer the following question(s).
Below are the expected after-tax cash flows for Projects Y and Z.Both projects have an initial cash outlay of $20,000 and a required rate of return of 17%.

What is payback for Project Z?

A)Two years
B)One year
C)Zero years
D)Project Z does not payback the original investment.

Question 72

MacHinery Manufacturing Company is considering a three-year project that has a cost of $75,000.The project will generate after-tax cash flows of $33,100 in Year 1,$31,500 in Year 2,and $31,200 in Year 3.Assume that the appropriate discount rate is 10% and that the firm's tax rate is 40%.What is the project's discounted payback period?

A)2.81 years
B)2.33 years
C)1.22 years
D)The project never reaches payback.

Question 73

Frazier Fudge has a project with an initial outlay of $40,000,followed by three years of annual incremental cash flows of $35,000.The terminal cash flow of the project is $10,000.Assuming a cost of capital of 10%,calculate the MIRR of the project.

A)46.5%
B)51.3%
C)62.9%
D)74.7%

Question 74

We-Know-Widgets,Inc.is analyzing a project that requires an initial investment of $10,000,followed by cash inflows of $1,000 in Year 1,$4,000 in Year 2,and $15,000 in Year 3.The cost of capital is 10%.What is the profitability index of the project?

A)1.04
B)1.55
C)1.78
D)1.97

Question 75

The owner of a small construction business has asked you to evaluate the purchase of a new front end loader.You have determined that this investment has a large,positive,NPV,but are afraid that your client will not understand the method.A good alternative method in this circumstance might be

A)the payback method
B)the profitability index
C)the internal rate of return
D)the modified internal rate of return

Question 76

Use the following information to answer the following question(s).
Below are the expected after-tax cash flows for Projects Y and Z.Both projects have an initial cash outlay of $20,000 and a required rate of return of 17%.

Discounted payback for Project Y is:

A)three years.
B)3.14 years.
C)four years.
D)two years.

Question 77

You are considering investing in a project with the following year-end after-tax cash flows:
Year 1: $5,000
Year 2: $3,200
Year 3: $7,800
If the initial outlay for the project is $12,113,compute the project's IRR.

A)14%
B)10%
C)32%
D)24%

Question 78

Analysis of a machine indicates that it has a cost of $5,375,000.The machine is expected to produce cash inflows of $1,825,000 in Year 1;$1,775,000 in Year 2;$1,630,000 in Year 3;$1,585,000 in Year 4;and $1,650,000 in Year 5.What is the machine's IRR?

A)12.16%
B)17.81%
C)23.00%
D)11.11%

Question 79

The Seattle Corporation has been presented with an investment opportunity which will yield cash flows of $30,000 per year in Years 1 through 4,$35,000 per year in Years 5 through 9,and $40,000 in Year 10.This investment will cost the firm $150,000 today,and the firm's cost of capital is 10%.Assume cash flows occur evenly during the year,1/365th each day.What is the discounted payback period for this investment?

A)5.23 years
B)4.86 years
C)4.35 years
D)3.72 years

Question 80

Project H requires an initial investment of $100,000 and produces annual cash flows of $50,000,$40,000,and $30,000.Project T requires an initial investment of $100,000 and the produces annual cash flows of $30,000,$40,000,and $50,000.The projects are mutually exclusive.The company accepts projects with payback periods of 3 years or less.

A)Project H will be accepted.
B)Project T will be accepted.
C)H and T will both be accepted.
D)Neither projected will be accepted.