You are evaluating a project that will cost

$483,000,

but is expected to produce cash flows of

$120,000

per year for

10

years, with the first cash flow in one year. Your cost of capital is

11.5%

and your company's preferred payback period is three years or less.

a. What is the payback period of this project?

b. Should you take the project if you want to increase the value of the company?