Compute the Payback Statistic for Project X and Recommend Whether

Multiple Choice

Compute the payback statistic for Project X and recommend whether the firm should accept or reject the project with the cash flows shown as follows if the appropriate cost of capital is 9 percent and the maximum allowable payback is four years. $$\begin{array} { | l | c | c | c | c | c | c | } \hline \text { Time: } & 0 & 1 & 2 & 3 & 4 & 5 \\\hline \text { Cash flow: } & - 1,000 & - 75 & 100 & 100 & 0 & 2,000 \\\hline\end{array}$$

A) 3.4375 years, accept
B) 3.78 years, reject
C) 4.4375 years, reject
D) 4.78 years, accept