Payback Decision Rule
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An Electronics firm has a required payback period of 3 years for all of its projects. Currently the firm is analyzing two independent projects. Project A has an expected payback period of 2.8 yrs and a net present value of $6,900. Project B has and expected payback period of 3.1 years with a net present value of $28,400. Which project should be accepted based on the payback decision rule?
Project A only
Project B only
Both A and B
Neither A nor B
Answer cannot be determined based on the information given
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Solution Summary
Given the payback periods and net present values of two projects, and a company's rule for accepting projects, this solution illustrate how to determine which project(s) to accept.
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Project A only. This is the main problem with using payback period ...
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