All else equal, the payback period for a project will decrease whenever the:
A)initial cost increases.
B)required return for a project increases.
C)assigned discount rate decreases.
D)cash inﬂows are moved earlier in time.
E)duration of a project is lengthened.

Question

Quizplus · Accepted Answer

The payback period is the amount of time it takes for the initial investment to be recouped through cash inflows. Moving cash inflows earlier in time will decrease the payback period, making option D the correct choice. Increasing the initial cost (option A) or lengthening the duration of the project (option E) will both increase the payback period. The required return (option B) and discount rate (option C) are both factors that can affect the calculation of the payback period, but they do not directly impact the duration of time it takes to recoup the initial investment.

All Else Equal, the Payback Period for a Project Will