The payback period rule accepts all investment projects in which the payback period for the cash flows is:
A) greater than one.
B) greater than the cutoff point.
C) less than the cutoff point.
D) positive.
E) None of these.

Question

Quizplus · Accepted Answer

The payback period rule accepts investment projects where the payback period for the cash flows is less than the cutoff point. This means that the project should be able to recover its initial investment within a certain predetermined period of time, usually set by the company's management or investors. Projects that take too long to recoup their initial investment are considered too risky and may be rejected. Projects that have a shorter payback period are preferred because they provide a faster return on investment. Therefore, the correct answer is C.

The Payback Period Rule Accepts All Investment Projects in Which