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

Question

Quizplus · Accepted Answer

The discounted payback period rule does consider the time value of money by discounting future cash flows back to their present value. This helps to account for the fact that money received in the future is not worth as much as money received today. The other options are incorrect; the discounted payback period rule does not discount the cutoff point (B), ignores uncertain cash flows (C), and is generally not preferred to the NPV rule (D).

The Discounted Payback Period Rule