Assume that a project consists of an initial cash outlay of $100,000 followed by equal annual cash inflows of $40,000 for 4 years.In the formula X = $100,000/$40,000,X represents the
A)payback period for the project.
B)profitability index of the project.
C)internal rate of return for the project.
D)project's discount rate.

Question

Quizplus · Accepted Answer

The formula X = $100,000/$40,000 calculates the payback period for the project, which is the amount of time it takes for the project to recoup its initial investment. In this case, the payback period is X = 2.5 years, meaning the project will break even after 2.5 years of cash inflows.

Assume That a Project Consists of an Initial Cash Outlay