Evaluate the following projects using the payback method assuming a rule of 3 years for payback.
A) Project A can be accepted because the payback period is 2.5 years but Project B cannot be accepted because it's payback period is longer than 3 years.
B) Project B should be accepted because even though the payback period is 2.5 years for Project A and 3.001 for project B, there is a $1,000,000 payoff in the 4th year in Project B.
C) Project B should be accepted because you get more money paid back in the long run.
D) Both projects can be accepted because the payback is less than 3 years.

Question

Evaluate the following projects using the payback method assuming a rule of 3 years for payback. 
A) Project A can be accepted because the payback period is 2.5 years but Project B cannot be accepted because it's payback period is longer than 3 years. 
B) Project B should be accepted because even though the payback period is 2.5 years for Project A and 3.001 for project B, there is a $1,000,000 payoff in the 4th year in Project B. 
C) Project B should be accepted because you get more money paid back in the long run. 
D) Both projects can be accepted because the payback is less than 3 years.

Quizplus · Accepted Answer

The payback period for Project A is within the specified limit of 3 years, while Project B exceeds the limit. Therefore, Project A is the better choice according to the payback method.

Evaluate the Following Projects Using the Payback Method Assuming a Rule