Without Using Formulas, Provide a Definition of Payback Period

question 105

Multiple Choice

Without using formulas, provide a definition of payback period.

• A) A project analysis tool that determines the amount of time required for an investment to generate cash flows to recover its initial cost.
• B) A project analysis tool that measures the acceptability of a project by determining the length of time required for an investment's discounted cash flows to equal its initial cost.
• C) A project analysis tool that measures the acceptability of a project through the difference between a project's initial investment and whether the present value of its cash flow will repay the investment.
• D) A project analysis tool that measures the acceptability of a project by determining the amount of profit that can be expected based on an investment made.
• E) A ranking method used to assess projects. PI greater than 1 signify positive NPV projects, while PI less than 1 signify negative NPV projects.

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Definitions:

Personal Property

Any form of property that is movable and not fixed permanently to one location, as opposed to real property or real estate.

Debtor's Possession

Refers to a situation in bankruptcy proceedings where the debtor retains possession and control of its assets while undergoing reorganization.

Security Interest

A legal claim or lien on collateral that has been offered to secure a loan, which grants the lender a right to repossession if the borrower defaults.

Perfection

In finance and law, the process of securing a claim or interest in an asset, typically making it enforceable against third parties.