Consider the following three projects. All three have an initial investment of

$ 700 comma 000$700,000.

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Data Table

	Net Cash Inflows
	Project L		Project M		Project N
Year	Annual	Accumulated	Annual	Accumulated	Annual	Accumulated
1	$87,500	$87,500	$137,500	$137,500	$350,000	$350,000
2	87,500	175,000	237,500	375,000	350,000	700,000
3	87,500	262,500	325,000	700,000
4	87,500	350,000	375,000	1,075,000
5	87,500	437,500	425,000	1,500,000
6	87,500	525,000
7	87,500	612,500
8	87,500	700,000

Requirements

1.	Determine the payback period of each project. Rank the projects from most desirable to least desirable based on payback.
2.	Are there other factors that should be considered in addition to the payback period?

Requirement 1. Determine the payback period of each project. Rank the projects from most desirable to least desirable based on payback.

First, determine the payback period of each project. (Enter the payback period as a numeral.)

Project	Payback period
Project L		years
Project M		years
Project N		years

Now, rank the projects from most desirable to least desirable based on payback.

Projects - Most to least desirable

Requirement 2. Are there other factors that should be considered in addition to the payback period?

A.

No. The payback period is the only quantitative factor necessary for a comparison of investments.

B.

No. The payback period is the only qualitative factor necessary for a comparison of investments.

C.

Yes. The company should consider which projects will generate cash flows after the payback period. In addition, the company should rank the projects based on the results of other evaluation methods (e.g., accounting rate of return, net present value, profitability index, and internal rate of return) and possible qualitative factors.