Hazir Products accepts capital investment projects with a payback period of four years or less.Under this condition,which of the following projects would be acceptable?
$\begin{array}{rr}
&\text { Project \#1 }&\text { Project \#2 }\
\text { Annual cash flows }&\$ 4000 & \$ 12000 \
\text { Initial investment }&20000&36000
\end{array}$

Question

Quizplus · Accepted Answer

Project #2 has a payback period of 3 years (36000/12000), which is less than the 4-year requirement, while Project #1 has a payback period of 5 years (20000/4000), which exceeds the requirement.

Hazir Products Accepts Capital Investment Projects with a Payback Period