Compute the Payback Statistic for Project X and Recommend Whether

question 77

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 9 percent and the maximum allowable payback is four years.
$$\begin{array}{l}\begin{array} {| l | l | l | l | l | l | l |}\hline\text {Time: }&0&1&2&3&4&5\\\hline\text {Cash flow:}&-1,000&-75&100&100&0&2,000\\\hline\end{array}\end{array}$$

• A) 3.4375 years, accept
• B) 3.78 years, reject
• C) 4.4375 years, reject
• D) 4.78 years, accept

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