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 as follows, 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 three and a half and four and a half years, respectively. Use the NPV decision to evaluate this project; should it be accepted or rejected? $$\begin{array} { | l | l | l | l | l | l | l | l | } \hline \text { Time } & 0 & 1 & 2 & 3 & 4 & 5 & 6 \\\hline \text { Cash } & - \$ 5,000 & \$ 1,200 & \$ 1,400 & \$ 1,600 & \$ 1,600 & \$ 1,100 & \$ 2,000 \\\text { Flow } & & & & & & & \\\hline\end{array}$$

A) NPV = $1,766.55; accept the project
B) NPV = $892.19; accept the project
C) NPV = $1,288.94; accept the project
D) NPV = -$104.73; reject the project