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 8 percent, and that the maximum allowable payback and discounted payback statistics for the project are 2.0 and 3.0 years, respectively.
Time: 0 1 2 3 4 5 6
Cash flow –$7,400 $1,150 $2,350 $1,550 $1,550 $1,350 $1,150
Use the PI decision rule to evaluate this project. (Do not round intermediate calculations. Round your final answer to 2 decimal places.)
PI
Should it be accepted or rejected?
Rejected
Accepted