Question

when considering two mutually exclusive projects, an organization adopted a payback period (pp) decision rule to accept the shorter payback period (pp) if it is 2.5 years or less. if project a has a payback of 2.6 years and project b has a payback of 3 years, which project(s) would be accepted?

Answer 1

Neither Project A with a payback period of 2.6 years nor Project B with a payback of 3 years would be accepted, as the organization's acceptable threshold for the payback period is 2.5 years or less.

Step-by-step explanation:

When considering two mutually exclusive projects, the organization in question uses the payback period (PP) decision rule, where a project is acceptable if its payback period is 2.5 years or less.

In this scenario, Project A has a payback period of 2.6 years, and Project B has a payback period of 3 years.

According to the given decision rule, neither Project A nor Project B would be accepted as their payback periods are both longer than the 2.5-year cutoff.