A Project's payback period is determined to be four years.If it is later discovered that additional cash flows will be generated in years five and six, then:
A)the Project's payback period will be reduced.
B)the Project's payback period will be increased.
C)the Project's payback period will be unchanged.
D)the discount rate must be known to determine whether the payback period changes.

Question

Quizplus · Accepted Answer

The payback period is the time it takes for a project to recover its initial investment from its cash inflows. Additional cash flows beyond the payback period do not affect the calculation of the payback period itself, which is solely concerned with reaching the break-even point.

A Project's Payback Period Is Determined to Be Four Years