A Project's Payback Period Is Determined to Be Four Years

question 12

Multiple Choice

A Project's payback period is determined to be four years.If it is later discovered that additional cash flows will be generated in years five and six, then:

• A)the Project's payback period will be reduced.
• B)the Project's payback period will be increased.
• C)the Project's payback period will be unchanged.
• D)the discount rate must be known to determine whether the payback period changes.

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Definitions:

Least-Cost Combination

An economic principle where firms seek to minimize their costs of production by using the most efficient combination of resources.

Inputs

The inputs including workforce, materials, and financial investment employed in the process of manufacturing products or delivering services.

Marginal Revenue Products

The additional revenue generated by employing one more unit of a factor of production, such as labor or capital.

Unit Costs

The cost incurred to produce, store, and sell one unit of a product, including raw material, labor, and overhead costs.