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24 June, 15:40

Project A has a predicted payback period of 2.5 and Project B has a predicted payback period of 5. Based on this information we can conclude that Select one: A. more information should be gathered before deciding on which project, if either, is desirable. B. Project A is preferred to Project B. C. Project B provides twice the return of Project A. D. Project B is preferred to Project A, but it is not necessarily twice as profitable.

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  1. 24 June, 17:16
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    A. more information should be gathered before deciding on which project, if either, is desirable.

    Explanation:

    The lower Payback Period is not sufficient information to decide which project is more profitable. The payback period indicates when in the life of a project the initial investment principal cash flow is achieved.

    But to decide about a certain project it is better to know the interest yield, it is also important to get the life of the project and other information.

    For example:

    a. - 250 investment 100 per year payback in 2.5-year life 3 years

    b. - 500 investment 100 per year payback in 5-year life 20 years

    While A payback occurs before project B is better
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