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 statistic for the project are three and three and a half years,respectively. Use the payback decision rule to evaluate this project; should it be accepted or rejected?

A) 2.45 years, accept
B) 2.83 years, accept
C) 3.45 years, accept
D) 3.83 years, reject