Compute the Payback Statistic for Project Y and Recommend Whether

question 27

Multiple Choice

Compute the payback statistic for Project Y 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 11 percent and the maximum allowable payback is one year. $$\begin{array} { | l | c | c | c | c | c | c | } \hline \text { Time: } & 0 & 1 & 2 & 3 & 4 & 5 \\\hline \text { Cash flow: } & - 100 & 75 & 100 & 300 & 75 & 200 \\\hline\end{array}$$

• A)1.25 years, reject
• B)1.25 years, accept
• C)1.33 years, accept
• D)2.25 years, accept

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