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 8 percent and the maximum allowable payback is 4 years.

Time: 0 1 2 3 4 5
Cash flow: -2,700 850 650 900 825 525

2.36 years, accept

3.36 years, reject

2.36 years, reject

3.36 years, accept

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