The Discounted Payback Period Rule

question 2

Multiple Choice

The discounted payback period rule:

• A)discounts the cutoff point.
• B)considers the time value of money.
• C)is preferred to the NPV rule.
• D)ignores uncertain cash flows.
• E)None of the above.

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Definitions:

Simplified Method

An IRS-approved strategy for calculating the taxable portion of annuity payments, primarily used to simplify tax reporting.

Taxable Income

The portion of one's income that is subject to taxation after all deductions, exemptions, and adjustments have been applied.

Single Life Annuity

An annuity that provides payments for the lifetime of the annuitant only, ceasing upon their death.

Annuity Contract

A financial product issued by an insurance company that offers fixed or variable payments to an individual, typically beginning at retirement.