The ____ of an investment is the period of time for the ____ to equal the initial cash outlay.
A) profitability index; present value of the cash inflows
B) payback period; cumulative cash inflows
C) payback period; present value of the cash inflows
D) None of these are correct

Question

Quizplus · Accepted Answer

The payback period is the time it takes for the cumulative cash inflows to equal the initial cash outlay. Therefore, option B is the correct answer. Option A is incorrect because the profitability index measures the present value of the cash inflows relative to the initial investment, but doesn't provide information about how long it takes to recoup the initial investment. Option C is also incorrect because the payback period is based on the cumulative cash inflows, not the present value of the cash inflows. Option D is incorrect because there is a correct answer.

The ____ of an Investment Is the Period of Time