An investment has a payback period of 5 years and a useful life of 10 years. If all other variables are held constant, which of the following changes would reduce the payback period?

Question

Quizplus · Accepted Answer

Increasing the cash inflows in years 1 and 2 would reduce the payback period because more cash is received earlier, allowing the investment to be paid back quicker. This has no impact on the useful life of the investment or its cost, which are not factors affecting payback period. Increasing cash inflows in years 9 and 10 would have no impact on payback period, as the investment would already have been paid back within 5 years.

An Investment Has a Payback Period of 5 Years and a Useful