Evaluate the following projects using the payback method assuming a rule of 3 years for payback.
Year Project A Project B
0 -10,000 -10,000
1 4,000 4,000
2 4,000 3,000
3 4,000 2,000
4 0 1,000,000
A) Project A can be accepted because the payback period is 2.5 years but Project B cannot be accepted because it's payback period is longer than 3 years.
B) Project B should be accepted because even though the payback period is 2.5 years for Project A and 3.001 for project B, there is a 1,000,000 payoff in the 4th year in Project B.
C) Project B should be accepted because you get more money paid back in the long run.
D) Both projects can be accepted because the payback is less than 3 years.
Question 2
Institutional investors are professional investors who work on behalf of individuals, business, and government.
Indicate whether the statement is true or false
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