Trek Company is considering two alternative investments. The payback period is 2.5 years for Investment A and
Question:
(1) If management relies on the payback period, which investment is preferred?
(2) Why might Trek’s analysis of these two alternatives lead to the selection of B over A?
Payback Period
Payback period method is a traditional method/ approach of capital budgeting. It is the simple and widely used quantitative method of Investment evaluation. Payback period is typically used to evaluate projects or investments before undergoing them,...
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