The discounted payback period of a project will decrease whenever the
A)initial cash outlay for the project is increased.
B)amount of each projected cash inflow is decreased.
C)discount rate applied to the project is decreased.
D)time period of the project is increased.
E)costs of the fixed assets utilized in the project increase.

Question

Quizplus · Accepted Answer

The discounted payback period measures the amount of time it takes for a project's discounted cash inflows to equal the initial cash outlay. By decreasing the discount rate applied to the project, the present value of each cash inflow is increased, which shortens the time it takes for the total discounted cash inflows to equal the initial cash outlay. Therefore, choice (C) is the best answer. Choices (A), (B), (D), and (E) would all increase the discounted payback period.

The Discounted Payback Period of a Project Will Decrease Whenever