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In determining the acceptability of a project using the payback method, the decision criteria is:

In determining the acceptability of a project using the payback method, the decision criteria is:

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Answer #1

Payback period represents the time period in which the initial investment of a project is recovered. The lower the payback period is of a project the better it is for a firm, since it denotes that with a lesser time period the initial investment in a project is recovered.

The decision criteria in case of a payback period is usually decided by the management of the firm which sets the upper limit of the payback period beyond which no project or projects shall be accepted.

If the payback period is less than or equal to the payback period as decided by the management, the project shall be accepted and vice versa if the payback period is more than the payback period as decided by the management, the project shall not be accepted.

Feel free to ask in case of any query relating to this question

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