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Compute the Payback statistic for Project X and recommend whether the firm should accept or reject the project with the cash flows shown below if
Compute the Payback statistic for Project X and recommend whether the firm should accept or reject the project with the cash flows shown below if the appropriate cost of capital is 9 percent and the maximum allowable payback is 4 years.
Time: | 0 | 1 | 2 | 3 | 4 | 5 |
---|---|---|---|---|---|---|
Cash flow: | 1,900 | 250 | 600 | 850 | 700 | 525 |
Multiple Choice
a. 3.29 years, Reject
b. 3.29 years, Accept
c. 2.29 years, Accept
d. 2.29 years, Reject
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