A Project Has a Required Payback Period of Three Years

Multiple Choice

A project has a required payback period of three years. Which one of the following statements is correct concerning the payback analysis of this project? 

A) The cash flows in each of the three years must exceed one-third of the project's initial cost if the project is to be accepted. 
B) The cash flow in Year 3 is ignored. 
C) The project's cash flow in Year 3 is discounted by a factor of (1 + R) ³.
D) The cash flow in Year 2 is valued just as highly as the cash flow in Year 1. 
E) The project is acceptable whenever the payback period exceeds three years.