When calculating a Project's payback period, cash flows are discounted at:
A)the opportunity cost of capital.
B)the internal rate of return.
C)the risk-free rate of return.
D)a discount rate of zero.

Question

Quizplus · Accepted Answer

The payback period calculation does not involve discounting cash flows, so it effectively uses a discount rate of zero. This method simply measures how long it takes for the initial investment to be recovered through the project's cash inflows, without considering the time value of money.

When Calculating a Project's Payback Period, Cash Flows Are Discounted