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Comparing Payback Period and Discounted Payback Period – Mathew Incorporated is debating using Payback Period

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Comparing Payback Period and Discounted Payback Period – Mathew Incorporated is debating using Payback Period versus Discounted Payback Period for small dollar projects. The Information Officer has submitted a new computer project of $15,000 cost. The cash flows will be $5,000 each year for the next five years. The cut-off period used by Mathew Incorporated is three years. The Information Officer states it doesn’t matter what model the company uses for the decision, it is clearly an acceptable project. Demonstrate for the IO that the selection of the model does matter!

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