All else equal, the payback period for a project will decrease whenever the:
A) Initial cost increases.
B) Required return for a project increases.
C) Assigned discount rate decreases.
D) Cash inﬂows are moved forward in time.
E) Duration of a project is lengthened.

Question

Quizplus · Accepted Answer

The payback period is the length of time required to recover the initial cost of an investment. Therefore, if the cash inflows are moved forward in time, the payback period will decrease as the initial cost will be recovered sooner. The other options would increase the payback period, which is not desirable.

All Else Equal, the Payback Period for a Project Will