Payback Period is the time it takes for the organization to earn back the initial investment (in terms of monetary cost) to the project and begin making profits.
As a PM, you are given the responsibility of selecting a project from two proposals A and B based on the information on hand: Project A has a payback period of 20 months while Project B has a payback period of 30 months. Which one would you recommend?
A. Project A
B. Project B
C. Neither one is beneficial to the organization.
D. Ask the project sponsor to choose.
Solution: A
The shorter the Payback Period, the more favorable the project financially is to the organization.
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