Maximum acceptable payback period

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Payback period

Jordan Enterprises is considering a capital expenditure that requires an initial investment of ?$37,000 and returns? after-tax cash inflows of ?$6,632 per year for 10 years. The firm has a maximum acceptable payback period of 8 years.

a. The payback period for this project is __ years. ?(Round to two decimal? places.)

b. Should the company accept the? project? ?(Select the best answer? below.)

A. The company should accept the project since the payback period is less than the maximum.

B. The company should accept the project since the? after-tax cash flows occur for more years than the maximum acceptable payback.

C. The company should reject the project since the? after-tax cash flows occur for more years than the maximum acceptable payback.

D. The company should reject the project since the payback period is less than the maximum.

E. The company should reject the project since the payback period is less than the number of years of the? after-tax cash flows.

Reference no: EM131987061

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