21. Samuelson Electronics has a required payback period of three years for all o

Question

21.

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.

Either, but not both projects.

21.

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.

Either, but not both projects.

Explanation / Answer

Project A only.

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