Evaluate the Following Projects Using the Payback Method Assuming a Rule

question 134

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 can not be accepted because it's payback period is longer than 3 years.
• B) Project B should be accepted because even thought the payback period is 2.5 years for project A and 3.001 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.

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Definitions:

Nonexcludability

Refers to a situation in a market where it's impossible to exclude individuals from using a good or service, often associated with public goods.

Chemical Industry

A sector that produces and sells chemicals and substances obtained by transforming raw materials through chemical processes.

Economic Efficiency

Economic efficiency occurs when all resources are allocated optimally to serve each individual or entity in the best way while minimizing waste and inefficiency.

Competitive Market

A market structure characterized by a large number of buyers and sellers, where no single entity can dictate prices.