The Payback Period Rule

question 34

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) Both determines a cutoff point so that all projects accepted by the NPV rule will be accepted by the payback period rule; and varies the cutoff point with the interest ratE.

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