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Suppose your firm is considering investing in a project with the cash flows shown below, that the required rate of return on projects of this

Suppose your firm is considering investing in a project with the cash flows shown below, that the required rate of return on projects of this risk class is 14 percent, and that the maximum allowable payback and discounted payback statistic for the project are 2 and 3 years, respectively.

Time 0 1 2 3 4 5 6

-1,170 10 590 790 790 390 790 = cash flow

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

3.59 years, reject

2.63 years, accept

2.55 years, accept

3.37 years, reject

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