Question: Compute the Payback statistic for Project X and recommend whether the firm should accept or reject the project with the cash flows shown below if

Compute the Payback statistic for Project X and recommend whether the firm should accept or reject the project with the cash flows shown below if the appropriate cost of capital is 9 percent and the maximum allowable payback is 4 years.

Time: 0 1 2 3 4 5
Cash flow: 1,900 250 600 850 700

525

Multiple Choice

a. 3.29 years, Reject

b. 3.29 years, Accept

c. 2.29 years, Accept

d. 2.29 years, Reject

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