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5 Macy's uses the Payback Period method for evaluating its projects. The Payback Period cut-off rule...

5 Macy's uses the Payback Period method for evaluating its projects. The Payback Period cut-off rule is 3 years. Macys is considering the following project: Cash Flow for Year Project A 0 -$75,000 1 $33,000 2 $36,000 3 $19,000 4 $9,000 Required: a) Should macys accept or reject Project A why or why not?

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Answer #1

As Payback period = 2.32 years < Pay back cutoff (3), the project can be accepted.

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