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

Question

Quizplus · Accepted Answer

The payback period is the period of time required to recover the initial investment. It is calculated by dividing the initial cash outlay by the cumulative cash inflows. Therefore, option B - payback period and cumulative cash inflows is the correct choice. Option A is incorrect because profitability index refers to the ratio of the present value of cash inflows to the initial investment. Option C is incorrect because while payback period is correct, present value of the cash inflows is not used in its calculation. Option D is incorrect because there is a correct answer among the choices.

The of an Investment Is the Period of Time for the to Equal