# Compute the Payback statistic for Project X and recommend whether

## Question: Compute the Payback statistic for Project X and recommend

Compute the Payback statistic for Project X and recommend whether the firm should accept or reject the project with the cash flows shown below if the appropriate cost of capital is 12 percent and the maximum allowable payback is 3 years.

Time: | 0 | 1 | 2 | 3 | 4 | 5 |

Cash flow: | -2,600 | 875 | 700 | 950 | 875 | 500 |

2.09 years, Reject

3.09 years, Accept

3.09 years, Reject

2.09 years, Accept