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 3 years.

Time: 0 1 2 3 4 5
Cash flow: -2,800 875 600 850 800 550

3.59 years, reject

2.59 years, accept

2.59 years, reject

3.59 years, accept

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