Samuelson Electronics Has a Required Payback Period of Three Years

question 36

Multiple Choice

Samuelson Electronics has a required payback period of three years for all of its projects.Currently,the firm is analyzing two independent projects.Project A has an expected payback period of 2.8 years and a net present value of $6,800.Project B has an expected payback period of 3.1 years with a net present value of $28,400.Which projects should be accepted based on the payback decision rule?

• A)Project A only
• B)Project B only
• C)Both A and B
• D)Neither A nor B
• E)Answer cannot be determined based on the information given.

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Definitions:

Marginal Costs

The additional financial burden incurred from producing another unit of a product or service.

External Cost

A cost incurred by a third party who did not agree to the action causing the cost.

Marginal Costs

The additional cost of producing one more unit of a product or service.

External Cost

Costs that are not borne by the individuals or entities responsible for producing or consuming a good or service, often affecting third parties.