Gander, Inc. is considering two projects with the following cash flows.
Gander uses the payback period method of capital budgeting and accepts only projects with payback periods of 3 years or less.
a. If the projects are presented as standalone opportunities which one(s) would Gander accept? If they were mutually exclusive and Gander disregarded its three year rule, which project would be chosen?
b. Is there a flaw in the thinking behind the correct answers to parta?
This question was answered on: Jul 11, 2017
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