Use the payback decision rule to evaluate this project; should it be accepted or rejected?
A) 2.45 years, accept
B) 2.83 years, accept
C) 3.45 years, accept
D) 3.83 years, reject

Question

Quizplus · Accepted Answer

The payback period is the time it takes for the project to generate enough cash inflows to recover the initial investment. The shorter the payback period, the better. In this case, option A has the shortest payback period of 2.45 years, which is less than 3 years. Therefore, based on the payback decision rule, the project should be accepted. Options B, C, and D have longer payback periods and would not meet the payback period requirement.

Use the Payback Decision Rule to Evaluate This Project; Should