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Payback Method

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The manager of Simple Company must choose between two investments. Project A costs $50,000 and promises cash savings of $10,000 a year over a useful life of 10 year. Project B costs $60,000, and the estimated cash savings are $11,000 per year over a useful life of 11 years. Using the payback method, determine which project the manager should choose.

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Solution Summary

Solution to calculate payback method and compare different projects.

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Payback method is simply how long it will take to pay back the initial outlay. The payback method does not use any present value in the ...

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