Compute the Payback Statistic for Project X and Recommend Whether

question 7

Multiple Choice

Compute the payback statistic for Project X and recommend whether the firm should accept or reject the project with the cash flows shown as follows if the appropriate cost of capital is 10 percent and the maximum allowable payback is five years.
$$\begin{array}{l}\begin{array} {| l | l | l | l | l | l | l |}\hline\text {Time: }&0&1&2&3&4&5\\\hline\text {Cash flow:}&-75&-75&0&100&75&50\\\hline\end{array}\end{array}$$

• A) 3.67 years, accept
• B) 4.67 years, accept
• C) 3.67 years, reject
• D) 4.67 years, reject