Which of the following decision rules is best defined as the amount of time it takes to pay back the initial investment?
A)internal rate of return (IRR)
B)profitability index
C)net present value (NPV)
D)payback period
E)incremental IRR

Question

Quizplus · Accepted Answer

The payback period is defined as the amount of time it takes to pay back the initial investment. Therefore, option D is the correct choice. The other options, such as IRR, NPV, and profitability index, are based on calculations of present value, future cash flows, and discount rates, but they do not directly measure the time it takes to recover the initial investment. Incremental IRR is a variant of the standard IRR method and is used to evaluate two projects.

Which of the Following Decision Rules Is Best Defined as the Amount