Two investments have the same total cash inflows and the same payback period. Therefore:
A) These two investments are equally desirable.
B) These two investments must be identical in terms of the present value of the cash inflows.
C) The payback period method can help decision makers choose between these two investments.
D) One pattern of cash inflows may, in a present value sense, be preferable to the other investment's pattern of cash inflows.
E) Most likely, these two investments required approximately the same initial investment.

Question

Quizplus · Accepted Answer

The payback period only measures how long it takes to recover the initial investment, not the value of money over time. Two investments can have the same payback period but different present values of cash inflows due to varying cash flow patterns over time, making one investment potentially more desirable than the other when considering the time value of money.

Two Investments Have the Same Total Cash Inflows and the Same