Use the information for the question(s) below.

-If WiseGuy Inc. uses payback period rule to choose projects, which of the projects (Project A or Project B) Project B
A) Project A
B) will WiseGuy Inc. prefer?
C) Project A and Project B have the same ranking.
D) Cannot calculate a payback period without a discount rate.

Question

Use the information for the question(s) below.
 
-If WiseGuy Inc. uses payback period rule to choose projects, which of the projects (Project A or Project B) Project B
A) Project A 
B) will WiseGuy Inc. prefer? 
C) Project A and Project B have the same ranking. 
D) Cannot calculate a payback period without a discount rate.

Quizplus · Accepted Answer

The payback period rule states that a project should be accepted if its payback period is less than a specified period. Project B has a shorter payback period than Project A, making it a better choice according to this rule. Adding a discount rate may change the rankings, but this information is not given in the question. Therefore, the best choice is Project B.

Use the Information for the Question(s) Below