Suppose Your Firm Is Considering Investing in a Project with the Cash

Multiple Choice

Suppose your firm is considering investing in a project with the cash flows shown below, that the required rate of return on projects of this risk class is 8 percent, and that the maximum allowable payback and discounted payback statistics for the project are 3.5 and 4.5 years, respectively. Use the payback decision to evaluate this project; should it be accepted or rejected?

A) Payback = 4.44 years; reject
B) Payback = 3.44 years; accept
C) Payback = 3.54 years; reject
D) Payback = 3.24 years; reject