You are evaluating an investment project costing $11,200 initially. The project will provide $3,000 in after-tax cash flows in the first year and $5,000 each year thereafter for 4 years. The maximum payback period for your company is 3 years. Your company's cost of capital is 14%.
1. What is the discounted payback period for this project?
2. Should your company accept this project based on the discounted payback period criterion?