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

Question

Quizplus · Accepted Answer

The discounted payback period calculation takes into account the time value of money, so if the amount of each cash inflow is increased, the project will generate more cash flow per period, allowing it to pay back its initial investment sooner. Therefore, the discounted payback period will decrease. The other factors listed may have the opposite effect.

The Discounted Payback Period of a Project Will Decrease Whenever