The payback period rule accepts all projects for which the payback period is:
A) Greater than the cut-off value
B) Less than the cut-off value
C) Is positive
D) An integer

Question

Quizplus · Accepted Answer

The payback period rule accepts all projects for which the payback period is less than the cut-off value, indicating that the project will generate cash inflows in a shorter time period than expected. A longer payback period would result in a higher risk for the investor, as there is a greater uncertainty in the future cash flows. Therefore, a shorter payback period is preferred, making option B the best choice. Options A, C, and D are incorrect as they do not accurately reflect the payback period rule.

The Payback Period Rule Accepts All Projects for Which the Payback