A 4-year project, X, with an upfront cost of $20 million is expected to yield the following series of cash flows: $3.60 million in year one, $4.20 million in year two, $5.70 million in year three, and $7.80 million in year four. At the end of year four, the projects assets will be liquidated and sold for a net cash flow of $9.20 million. The required rate of return on the project is 14%.

1. Calculate the PBP of the project and use the PBP decision rule to decide whether to invest in the project assuming the standard payback is 3.5 years.

2. Calculate the DPBP of the project and use the DPBP decision rule to decide whether to invest in the project assuming the standard payback is 3.5 years.