10%
i.
What does the profitability index (PI) measure?
What are the PIs for Franchises
S and L?
j.
1.
What is the payback period?
Find the paybacks for franchises L and S.
50
3

80
j.
2.
What is the rationale for the payback method?
According to the payback
criterion, which franchise or franchises should be accepted if the firm's
maximum acceptable payback is 2 years, and if franchises L and S are
independent?
If they are mutually exclusive?
Mini Case:
1
0
1
 41
j.
3.
What is the difference between the regular and discounted payback periods?
j.
4.
What is the main disadvantage of discounted payback?
Is the payback method
of any real usefulness in capital budgeting decisions?
,