Unfortunately, your chief executive officer refuses to accept any investments in plant expansion that do not return

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Unfortunately, your chief executive officer refuses to accept any investments in plant expansion that do not return their original investment in four years or less. That is, he insists on a payback rule with a cutoff period of four years. As a result, attractive long-lived projects are being turned down. The CEO is willing to switch to a discounted payback rule with the same four-year cutoff period. Would this be an improvement? Explain.

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Principles of Corporate Finance

ISBN: 978-0072869460

7th edition

Authors: Richard A. Brealey, Stewart C. Myers

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