When Choosing Between Two Mutually Exclusive Projects Using the Payback

question 14

Multiple Choice

When choosing between two mutually exclusive projects using the payback period method for evaluating capital projects, one would choose

• A) either project if they both are more than managers' maximum payback period.
• B) neither project if they both are less than managers' maximum payback period.
• C) the project that pays back the soonest.
• D) the project that pays back the soonest if it is equal to or less than managers' maximum payback period.

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Definitions:

Limited Liability

A legal principle that limits an investor's loss in a business venture to the amount of capital invested, protecting personal assets from business debts and obligations.

Tax-Exempt Status

A designation that exempts specific entities or income from tax under federal or state laws.

Personal Assets

Items of value owned by an individual, including both tangible and intangible assets, such as cash, property, investments, and intellectual property.

Insolvent

The condition of being unable to pay off owed debts as they become due.