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 PI decision to evaluate this project; should it be accepted or rejected?

A) PI = 6.94%; reject the project
B) PI = 7.52%; reject the project
C) PI = 23.61%; accept the project
D) PI = 35.33%; accept the project