Porter Co. is analyzing two potential investments. If the company is using the payback period method and it requires a payback of three years or less, which project(s) should be selected?

Question

Porter Co. is analyzing two potential investments.  If the company is using the payback period method and it requires a payback of three years or less, which project(s) should be selected?

Quizplus · Accepted Answer

Project X payback period: $68,000/$24,000 per year = 2.83 years
Project Y payback period:
 11eaadfd_cc63_e05c_95d8_13aa573d0d14_TB6948_00 Payback period = 3 years + (4/20) = 3.2 years

Porter Co Is Analyzing Two Potential Investments