A Project Has a Required Payback Period of Three Years

question 62

Multiple Choice

A project has a required payback period of three years. Which one of the following statements is correct concerning the payback analysis of this project? 

• A) The cash flows in each of the three years must exceed one-third of the project's initial cost if the project is to be accepted. 
• B) The cash flow in Year 3 is ignored. 
• C) The project's cash flow in Year 3 is discounted by a factor of (1 + R)³.
• D) The cash flow in Year 2 is valued just as highly as the cash flow in Year 1. 
• E) The project is acceptable whenever the payback period exceeds three years. 

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