If the payback period for a project is greater than its economic life the
A) project will always be profitable.
B) entire initial investment will never be recovered.
C) project would only be acceptable if the company's cost of capital was low.
D) project's return will always exceed the company's cost of capital.

Question

Quizplus · Accepted Answer

If the payback period for a project is greater than its economic life, it means that the project will not generate enough cash flows to recover the initial investment before it reaches the end of its economic life. This indicates that the entire initial investment will never be recovered. Therefore, choice B is the correct answer. Choices A, C, and D are incorrect because they do not represent a plausible scenario for a project with a payback period greater than its economic life.

If the Payback Period for a Project Is Greater Than