When calculating a project's payback period,cash flows are:
A) discounted at the opportunity cost of capital.
B) discounted at the internal rate of return.
C) discounted at the risk-free rate of return.
D) not discounted at all.

Question

Quizplus · Accepted Answer

When calculating a project's payback period, cash flows are not discounted at all. The payback period is simply the length of time it takes for the initial investment to be recouped through the cash flows generated by the project. Therefore, there is no need to discount the cash flows.

When Calculating a Project's Payback Period,cash Flows Are