The discounted payback period rule:
A)discounts the cutoff point.
B)considers the time value of money.
C)is preferred to the NPV rule.
D)ignores uncertain cash flows.
E)None of the above.

Question

Quizplus · Accepted Answer

The discounted payback period rule considers the time value of money, which means it takes into account that money today is worth more than the same amount of money in the future due to inflation and potential investment opportunities. This makes it a more accurate measure of profitability than using an unadjusted payback period. However, it still ignores uncertain cash flows and may not be as preferred as the NPV rule, which takes into account all cash flows and considers the cost of capital.

The Discounted Payback Period Rule