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 10 percent, and that the maximum allowable payback and discounted payback statistic for the project are 2 and 3 years, respectively.
Time 0 1 2 3 4 5 6
Cash Flow -1,130 50 550 750 750 350 750
Use the payback decision rule to evaluate this project; should it be accepted or rejected?
1.07 years, accept
2.71 years, reject
0 years, accept
4.00 years, reject