Acme Corp has a target debt/equity ratio of 0.35. It was $350 million in bonds outstanding with a yield of 7% and 50 million shares of stock outstanding with a current market price of $20 per share. The companys beta is 1.32 and the risk-free rate of interest is 4% with a market risk premium of 6%. The firm has a tax rate of 25%. The company is looking to raise $250 million to build a second factory. The new factory will increase output substantially. The table below shows the anticipated cash flows generated from the new factory including a salvage value in year 5. What is the payback for this project?

Year	Cash Flow ($mill)
0	-250
1	50
2	50
3	100
4	100
5	100

Answer Choices

4 Years

3.75 Years

3.5 Years 4.25 Years