Which one of the following statements is correct concerning the payback period?
A) An investment is acceptable if its calculated payback period is less than some pre-specified period of time.
B) An investment should be accepted if the payback is positive and rejected if it is negative.
C) An investment should be rejected if the payback is positive and accepted if it is negative.
D) An investment is acceptable if its calculated payback period is greater than some pre-specified period of time.
E) An investment should be accepted any time the payback period is less than the discounted payback period, given a positive discount rate.

Question

Quizplus · Accepted Answer

The payback period is a capital budgeting method that calculates the time required for an investment to generate cash flows to recover its initial cost. An investment is considered acceptable if its payback period is less than a pre-specified period, as this indicates a quicker recovery of the invested funds.

Which One of the Following Statements Is Correct Concerning the Payback