Should the following project be accepted if the company requires both a

payback on discounted cash flows within three years (assuming a hurdle rate of 11%) AND a

payback on nominal dollars within three years?

Project cash flows are:

Cost of the project in year zero is $60,000

End of year one inflow = 25,000

End of year two inflow = 30,000

End of year three inflow = 35,000

End of year four inflow = 40,000

a. Yes, the project should be accepted because both the undiscounted and discounted payback periods are less than three years.

b. No, while the undiscounted cash flow payback is less than three years the payback for discounted cash flows exceeds three years.

c. No, while the discounted cash flow payback is less than three years the payback for undiscounted cash flows exceeds three years.

d. No, both the undiscounted and discounted cash flow paybacks exceed three years.