Cortes Cargo,Inc.is considering three investment opportunities with the following payback periods: $$\begin{array} { | l | c | c | c | }
\hline & \text { Project } X & \text { Project } Y & \text { Project } Z \
\hline \text { Payback period } & 3 \text { years } & 2.5 \text { years } & 2.8 \text { years } \
\hline
\end{array}$$ Use the decision rule for payback to rank the projects from most desirable to least desirable,all else being equal.

Question

Cortes Cargo,Inc.is considering three investment opportunities with the following payback periods: $$\begin{array} { | l | c | c | c | } 
\hline & \text { Project } X & \text { Project } Y & \text { Project } Z \
\hline \text { Payback period } & 3 \text { years } & 2.5 \text { years } & 2.8 \text { years } \
\hline
\end{array}$$ Use the decision rule for payback to rank the projects from most desirable to least desirable,all else being equal.

Quizplus · Accepted Answer

The payback period is the time it takes for an investment to generate an amount of income or cash equivalent to the cost of the investment. The shorter the payback period, the more desirable the investment. Therefore, Project Y (2.5 years) is the most desirable, followed by Project Z (2.8 years), and then Project X (3 years).

Cortes Cargo,Inc Use the Decision Rule for Payback to Rank the Projects