An investment
A)is acceptable if its calculated payback period is less than some prespecified period of time.
B)should be accepted if the payback is positive and rejected if it is negative.
C)should be rejected if the payback is positive and accepted if it is negative.
D)is acceptable if its calculated payback period is greater than some prespecified period of time.
E)should be accepted any time the payback period is less than the discounted payback period,given a positive discount rate.

Question

Quizplus · Accepted Answer

The payback period is a capital budgeting method that calculates the time required for an investment to generate cash flows sufficient to recover the initial investment cost. An investment is considered acceptable if its payback period is less than a predetermined period set by the investor or company, as it indicates a quicker recovery of the invested funds.

An Investment