The Length of Time Required for a Project's Discounted Cash

question 89

Multiple Choice

The length of time required for a project's discounted cash flows to equal the initial cost of the project is called the:

• A)net present value.
• B)internal rate of return.
• C)payback period.
• D)discounted profitability index.
• E)discounted payback period.

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Definitions:

Static Planning Budget

A budget based on a fixed set of assumptions and output levels, without adjustments for actual activity or performance.

Variable Costs

Costs that change in proportion to the level of activity or volume of production in a business, such as materials and labor.

Activity Variance

The difference between a revenue or cost item in the flexible budget and the same item in the static planning budget. An activity variance is due solely to the difference between the actual level of activity used in the flexible budget and the level of activity assumed in the planning budget.

Flexible Budget

A report showing estimates of what revenues and costs should have been, given the actual level of activity for the period.