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# Answer to Question #146980 in Finance for Jenelle Daniel

Question #146980
Canada Golf Club (CGC) is considering three independent projects for July 2021 tournament. The three projects are project A, project B and project C. Given the following cash flow information, calculate the payback period for each. If CGC requires a 3-year payback before an investment can be made, which project(s) would be accepted?

Year Project A ($) Project B ($) Project C ($) 0 (Investment) -1,000 -$10,000 -$5,000 1 600 4,000 2,000 2 300 3,000 1,000 3 200 2,000 2,000 4 100 2,000 1,000 5 500 4,000 2,000 1 Expert's answer 2020-12-06T18:22:10-0500 "\\bold {Answer}" Project A and Project C are acceptable "\\bold {Solution}" Calculation of Payback Periods Project A payback period: "= 2 \\space years + \\dfrac {\\$100}{\\$200}years" = 2 years + 0.5 years "=\\bold{ 2.5 \\space years }" Project B payback period: "= 3 \\space years + \\dfrac {\\$1,000}{\\\$2,000} years"

= 3 years + 0.5 years

"=\\bold{ 3.5 \\space years }"

Project C payback period:

"= \\bold {3 \\space years}"

Decision

Projects A and C are acceptable. Project A has a payback that is less than 3 years, and project C has an exactly 3 year payback. Thus, they are both acceptable under the firm's decision criteria.

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