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 7 percent, and that the maximum allowable payback and discounted payback statistics for the project are 2.5 and 3.5 years, respectively.
Time: 0 1 2 3 4 5 6
Cash flow –$4,700 $1,170 $2,370 $1,570 $1,570 $1,370 $1,170
Use the payback decision rule to evaluate this project. (Round your answer to 2 decimal places.)
Payback years
Should it be accepted or rejected?