Gander, Inc. is considering two projects with the following cash flows. Gander uses the payback period method
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Gander, Inc. is considering two projects with the following cash flows.
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Gander uses the payback period method of capital budgeting and accepts only projects with payback periods of 3 years or less.
a. If the projects are presented as standalone opportunities which one(s) would Gander accept? If they were mutually exclusive and Gander disregarded its three year rule, which project would be chosen?
b. Is there a flaw in the thinking behind the correct answers to parta?
Capital budgeting is a practice or method of analyzing investment decisions in capital expenditure, which is incurred at a point of time but benefits are yielded in future usually after one year or more, and incurred to obtain or improve the... 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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a Project X has a payback period of 25 years 100000 40000 25 ...View the full answer
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