What is the investment recommendation

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Assume that you can invest £1,000 today (t=0) to secure a stream of certain future cash flows over £100 starting from next year (t=1) and ending after 20 years (t=20), each occurring at the end of the year. You use the payback rule to evaluate the investment opportunity, deciding on a cut-off value equal to eight years. What is the investment recommendation of the payback rule?

1)You should not invest, because the payback period is less than the cutoff.

2)You should invest, because the payback period is greater than the cutoff value.

3)You should invest, because the payback period is less than the cutoff value.

4) You should not invest, because the payback period is greater than the cutoff value.

Please also provide a brief explanation.

Reference no: EM133110539

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