The payback period rule:
A)determines a cutoff point so that all projects accepted by the NPV rule will be accepted by the payback period rule.
B)determines a cutoff point so that depreciation is just equal to positive cash flows in the payback year.
C)requires an arbitrary choice of a cutoff point.
D)varies the cutoff point with the interest rate.
E)Both A and D.

Question

Quizplus · Accepted Answer

The payback period rule requires an arbitrary choice of a cutoff point, as it does not inherently consider the time value of money or interest rates.

The Payback Period Rule