Ginny Trueblood Is Considering an Investment Which Will Cost Her

Multiple Choice

Ginny Trueblood is considering an investment which will cost her $120,000. The investment produces no cash flows for the first year. In the second year the cash inflow is $35,000. This inflow will increase to $55,000 and then $75,000 for the following two years before ceasing permanently. Ginny requires a 10% rate of return and has a required discounted payback period of three years. Ginny should _______ this project because the discounted payback period is ______.

A) accept; 2.03 years
B) accept; 2.97 years
C) accept; 3.97 years
D) reject; 3.03 years
E) reject; 3.97 years