A Project Manager Is Using the Payback Method to Make

Multiple Choice

A project manager is using the payback method to make the final decision on which project to undertake.The company has a 15% required rate of return and expects a 5% rate of inflation for the following five years.What is the discounted payback of a project that has cash flows as shown in the table? $$\begin{array} { | l | l | } \hline \text { Year } & \text { Cash Flow } \\\hline 0 & -\$ 500,000 \\\hline 1 & \$ 50,000 \\\hline 2 & \$ 75,000 \\\hline 3 & \$ 150,000 \\\hline 4 & \$ 150,000 \\\hline 5 & \$ 750,000 \\\hline\end{array}$$

A) 3.9 years
B) 4.3 years
C) 4.6 years
D) 4.1 years