Payback, Accounting Rate of Return Refer to Exercise 20-5. 1. Compute the payback period for each project.

Question:

Payback, Accounting Rate of Return Refer to Exercise 20-5.

1. Compute the payback period for each project. Assume that the manager of the hospital accepts only projects with a payback period of three years or less. Offer some reasons why this may be a rational strategy even though the NPV computed in Exercise 20-5 may indicate otherwise.

2. Compute the accounting rate of return for each project using average investment.

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,...