The payback method assumes that the cash ﬂows:
A) Are an annuity stream.
B) Occur evenly throughout the year.
C) Occur at the end of the year.
D) Are discounted at the IRR rate.
E) Are calculated with the consideration of the time value of money.

Question

Quizplus · Accepted Answer

The payback method assumes that the cash flows occur evenly throughout the year, meaning that they are not discounted for the time value of money and do not necessarily form an annuity stream. The payback period is simply the amount of time it takes to recoup the initial investment based on the annual cash inflows.

The Payback Method Assumes That the Cash ﬂOws