Suppose your firm is considering investing in a project with the cash flows shown below, that the required rate of return on projects of this risk class is 7 percent, and that the maximum allowable payback and discounted payback statistics for the project are 3.5 and 4.5 years, respectively. Time: 0 1 2 3 4 5 6 Cash flow –$5,300 $1,300 $2,500 $1,700 $1,700 $1,500 $1,300
Use the discounted payback decision rule to evaluate this project. (Round your answer to 2 decimal places.)
Discounted payback years
Should it be accepted or rejected? Rejected Accepted