Radiology Associates is considering an investment which will cost $259,000. The investment produces no cash flows for

Question:

Radiology Associates is considering an investment which will cost $259,000. The investment produces no cash flows for the first year. In the second year, the cash inflow is $58,000. This inflow will increase to $150,000 and then $200,000 for the following two years before ceasing permanently. The firm requires a 14 percent rate of return and has a required discounted payback period of three years. Accept or reject this project? Why?

Payback Period
Payback period method is a traditional method/ approach of capital budgeting. It is the simple and widely used quantitative method of Investment evaluation. Payback period is typically used to evaluate projects or investments before undergoing them,...