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

question 65

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

---

Definitions:

Learning Curve

Graph relating amount of inputs needed by a firm to produce each unit of output to its cumulative output.

Average Costs

The total cost of production divided by the quantity produced, indicating the cost per unit of product or service.

Tolerances

The permitted variations in measurements or physical characteristics in the manufacturing or production of goods.

Economies of Scale

Economies of scale describe the reduction in per-unit cost that a company benefits from as it scales up production. This cost benefit is due to the fixed costs spreading over a larger number of units.