The discounted payback period of a project will decrease whenever the:

Question

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Discounted payback period is the time it takes to recover the initial investment in a project after accounting for the time value of money. Increasing the amount of each project cash flow will result in more cash being received in a shorter period of time, reducing the discounted payback period. Therefore, choice D is the best answer. Increase in the discount rate (choice A) and initial cash outlay (choice B) would increase the discounted payback period. Similarly, increasing the time period of the project (choice C) or costs of the fixed assets utilized in the project (choice E) would also increase the discounted payback period.

The Discounted Payback Period of a Project Will Decrease Whenever