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Question:
Which of the following projects should be chosen by the selection committee, given that only one project can be selected?
- Project A:
+ Original investment: $1 million.
+ The payback period: 18 months.
- Project B:
+ Original investment: $1.4 million.
+ The payback period: 18 months.
- Project C:
+ Original investment: $1.8 million.
+ The payback period: 18 months.
A
There isn’t enough information in the question to determine an answer.
explanation
There isn’t enough information to decide which project is the best to be chosen. The payback periods are all the same and are the least precise of the cash flow analysis techniques. Initial investment isn't enough to help choose among the projects
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