Asked by Bohdan Simakov on Apr 24, 2024
Verified
The payback period is defined as:
A) initial investment / annual cash inflow.
B) annual cash inflow / initial investment.
C) initial investment / useful life of investment.
D) initial investment / present value of the cash flows, exclusive of initial investment.
Payback Period
The length of time required to recover the cost of an investment, calculated by dividing the initial investment by annual cash inflow.
Initial Investment
The initial sum of money spent on starting a project, purchasing an asset, or establishing a business venture.
Annual Cash Inflow
Annual cash inflow is the total amount of money received by an individual or organization in one year from various sources, such as sales, investments, or financing activities.
- Apply the payback method in evaluating the profitability and risk of investments.
Verified Answer
ZK
Zybrea KnightMay 02, 2024
Final Answer :
A
Explanation :
The payback period is defined as the time it takes for the initial investment to be recovered through the annual cash inflows generated by the investment. It is calculated by dividing the initial investment by the annual cash inflow.
Learning Objectives
- Apply the payback method in evaluating the profitability and risk of investments.