The Payback Period Rule

question 70

Multiple Choice

The payback period rule:

• A) determines a cutoff point so that all projects accepted by the NPV rule will be accepted by
• the payback period rule.
• B) determines a cutoff point so that depreciation is just equal to positive cash flows in the
• payback year.
• C) requires an arbitrary choice of a cutoff point.
• D) varies the cutoff point with the interest rate.
• E) requires two cut-off points to control cash flows in each period.

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Definitions:

FOB Destination

A shipping term where the seller bears the shipping costs and retains ownership of the goods until they are delivered to the buyer’s location.

Gross Profit

is the difference between the revenue generated from sales and the cost of goods sold, indicating the financial health and profitability of a company's core activities.

Net Profit

The amount of money that remains from revenues after all the operating expenses, taxes, and costs have been subtracted.

Discounts

Reductions applied to the regular price of goods or services, often to stimulate sales or clear out inventory.