Evaluate the Following Projects Using the Payback Method Assuming a Rule

question 119

Multiple Choice

Evaluate the following projects using the payback method assuming a rule of 3 years for payback.

• A) Project A can be accepted because the payback period is 2.5 years but Project B cannot be accepted because its payback period is longer than 3 years.
• B) Project B should be accepted because even though the payback period is 2.5 years for Project A and 3.001 for project B, there is a $1,000,000 payoff in the 4th year in Project B.
• C) Project B should be accepted because you get more money paid back in the long run.
• D) Both projects can be accepted because the payback is less than 3 years.

---

Definitions:

Extraction

The process of removing or obtaining a substance from a mixture or compound by chemical or physical means.

Marine Animal

An organism that lives in saltwater environments, ranging from microscopic plankton to large mammals like whales.

Logically Distinct Group

A segment of entities or individuals that are differentiated based on logical or identifiable characteristics.

Present Value

The current value of a future sum of money or stream of cash flows given a specified rate of return.