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.

Time: 0 1 2 3 4 5

Cash Flow: 100,000 30,000 45,000 55,000 30,000 10,000

Use the discounted payback decision rule to evaluate this project; should it be accepted or rejected?

Multiple Choice:

2.77 years, accept

5.36 years, reject

2.45 years, accept

1.23 years, accept