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

Question

Quizplus · Accepted Answer

The payback period rule accepts investment projects in which the payback period for the cash flows is less than the cutoff point. This is because the payback period measures the length of time it takes for the initial investment to be recovered from the project's cash flows. Therefore, projects with shorter payback periods are preferable as they recover the initial investment more quickly.

The Payback Period Rule Accepts All Investment Projects in Which