You are evaluating a project for your company. The initial
outlay for the project is $5,000,000, and free cash flows for the
project are $1,000,000, $3,000,000, $3,000,000, $4,000,000 and
$4,000,000. For risk analysis, you utilize the Payback and
Discounted Payback methods to trigger increased risk scrutiny. Your
standard is, any project that goes longer than 3 years under either
metric will go through these increased risk tests.
If your required rate is 12%, does this project qualify for
increased scrutiny?...