The length of time required for an investment to generate cash flows sufficient to recover the initial cost of the investment is called the:
A) net present value.
B) internal rate of return.
C) payback period.
D) profitability index.
E) discounted cash period.

Question

Quizplus · Accepted Answer

The payback period is the length of time required for the cash inflows from an investment to equal the initial investment cost. Therefore, option C is the correct answer. Option A (net present value) and option B (internal rate of return) are metrics used to evaluate the feasibility of an investment, but they are not directly related to the payback period. Option D (profitability index) is a ratio of the present value of expected cash inflows to the initial investment cost, while option E (discounted cash period) is not a commonly used financial term.

The Length of Time Required for an Investment to Generate