Which project has the better payback period? Project A requires a $25,000 investment and provides $5,000 per year for 6 years; Project B requires an $8,000 project and provides $4,000 per year for 2 years. Explain the strengths and weaknesses of this approach.

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The Answer is Project B has the faster payback period. However, Project B doesn't make any profit for the organization. The payback method helps show how quickly the organization gets back its money. But it doesn't consider the cash flows or time value of money of the investment decisions.

Which Project Has the Better Payback Period? Project a Requires