The Payback Period Rule Is a Convenient and Useful Tool

question 25

Multiple Choice

The payback period rule is a convenient and useful tool because:

• A)it provides a quick estimate of how rapidly the initial investment will be recouped.
• B)results of a short payback rule decision will be quickly seen.
• C)it does not have to take into account time value of money.
• D)All of the above.
• E)None of the above.

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Definitions:

Equal Payments

Recurrent payment amounts in a financial agreement, such as a loan or lease, where each installment is the same over a given period.

Focal Date

A specific point in time that serves as a reference or target for financial calculations or contractual obligations.

Loan Date

The specific date on which a loan agreement is signed, and the funds are disbursed to the borrower.

Plant Capacity

Plant capacity refers to the maximum output or production that a manufacturing facility can achieve under normal conditions.