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Managerial Accounting

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Given Payback, Which is More Profitable?

MGRACT-KNRS@1

If you have two projects, one with a four-year payback period and another with a five-year payback period, can you tell which one has the better return overall?

A

You cannot tell with payback method computations.

B

Yes, the higher payback period is the one with better returns.

C

Yes, the lower payback period is the one with the better returns.

D

No, since you may be using different discount rates for the projects.