Suppose your firm is considering two mutually exclusive, required projects with the cash flows shown below. The required rate of return on projects of both of their risk class is 9 percent, and that the maximum allowable payback and discounted payback statistic for the projects are 2 and 3 years, respectively.

Time:	0	1	2	3
Project A Cash Flow	-26,000	16,000	36,000	7,000
Project B Cash Flow	-36,000	16,000	14,000	56,000

Use the payback decision rule to evaluate these projects; which one(s) should it be accepted or rejected?

Multiple Choice

1. accept neither A nor B

2. accept A, reject B

3. reject A, accept B

4. accept both A and B