The payback rule works best in evaluating which one of the following?
A)a low-cost project which pays back slowly
B)a low-cost project which pays back rapidly
C)a high-cost project with equal cash inflows over a long period of time
D)a high-cost project with increasing cash inflows over time
E)projects requiring significant research and development time

Question

Quizplus · Accepted Answer

The payback rule is most appropriate for projects with a low cost that can pay back the investment rapidly. This is because the payback period rule only measures the time it takes for a project to recover its initial investment. A low-cost project that pays back rapidly is more likely to have a shorter payback period, making it easier to evaluate using this method. Higher-cost projects, or those with uneven cash inflows, are better evaluated using other methods such as net present value or internal rate of return.

The Payback Rule Works Best in Evaluating Which One of the Following