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Question 5) An investment has a cost of $10 million. The investment is expected to generate cash flows of $2.5 million in year one and
Question 5) An investment has a cost of $10 million. The investment is expected to generate cash flows of $2.5 million in year one and $4 million in year 2 . Starting in year 3 , the investment will generate a cash flow of $2 million a year, each year, forever. The required rate of return f r this investment is 8% per year compounded annually. What are the payback period and discounted payback period for this investment, and should this investment be accepted or rejected? 1) The payback period is 5 years, the discounted payback period is 6 years, and this investment should be rejected. 2) The payback period is 5 years, the discounted payback period is 5 years, and this investment should be accepted. 3) The payback period is 4 years, the discounted payback period is 6 years, and this investment should be rejected. 4) The payback period is 4 years, the discounted payback period is 5 years, and this investment should be accepted
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