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Why Doesn't the Payback Rule Always Make Shareholders Better Off

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Why doesn't the payback rule always make shareholders better off?


Definitions:

Simple Interest

Interest calculated only on the initial principal of an investment or loan over a specified time period.

Contract

A legally binding agreement between two or more parties outlining obligations, rights, and conditions.

T-Bill

Short for Treasury Bill, a short-term government security issued at a discount from the par value and repaid at maturity.

Annual Rate

A percentage representing the interest or growth a sum of money would earn over the course of a year.

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