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 8 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 -35,000 25,000 45,000 16,000 Project B Cash Flow -45,000 25,000 5,000 65,000 Use the payback decision rule to evaluate these projects;
Which one(s) should it be accepted or rejected?
accept both A and B
accept A, reject B
accept neither A nor B
reject A, accept B