Suppose your firm is considering two mutually exclusive, required projects with the cash flows shown below. The required rate of return on projects of both of their risk class is 12 percent, and that the maximum allowable payback and discounted payback statistic for the projects are 2 and 3 years, respectively.
Time: 0 1 2 3
Project A Cash Flow -34,000 24,000 44,000 15,000
Project B Cash Flow -44,000 24,000 34,000 64,000
Use the PI decision rule to evaluate these projects; which one(s) should be accepted or rejected?
Accept both A and B
Reject A, accept B
Accept neither A nor B
Accept A, reject B