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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 3.5 and 4.5 years, respectively.
Time: 0 1 2 3 4 5 6
Cash flow –$4,800 $1,210 $2,410 $1,610 $1,530 $1,410 $1,210
Use the payback decision rule to evaluate this project. (Round your answer to 2 decimal places.)
Payback years
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