Firm accepts projects with payback periods


Question: A project that costs $2,500 to install will provide annual cash flows of $600 for the next 6 years. The firm accepts projects with payback periods of less than 5 years.

Will the project be accepted?

Should this project be pursued if the discount rate is 2 percent?

What if the discount rate is 12 percent?

Will the firm's decision change as the discount rate changes?

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Project Management: Firm accepts projects with payback periods
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