When a company compares a proposed project to a performance benchmark,which of the following benchmarks might the company use?

Question

Quizplus · Accepted Answer

Both the minimum required return on investment and the minimum number of years in which the project must return the original investment are commonly used performance benchmarks for a proposed project. The company may compare the proposed project's expected return on investment to the minimum required return on investment to determine if it is a financially viable project. Similarly, the company may evaluate the proposed project's payback period (i.e. the number of years in which the project will generate enough cash flow to return the original investment) and compare it to a benchmark (e.g. require a payback period of no more than 3 years) to determine if the project meets the company's investment criteria.

When a Company Compares a Proposed Project to a Performance