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If a firm has a payback period of 3 years and a project has a payback period of 3. 5 years, the project should be rejected.
Payback period is defined as the number of years required to recover the original cash investment. In other words, the period during which a machine, plant, or other investment has generated sufficient net income to cover its investment costs.
Simply put, the payback period is calculated by dividing the investment cost until the cumulative cash flow is positive by the annual cash flow. This is the payback year.
The payback period indicates the time it takes for a company to recoup its investment. This type of analysis allows companies to compare alternative investment opportunities and select projects that will pay off in the shortest possible time when this criterion is important.
Learn more about payback period here: https://brainly.com/question/23149718
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