Payback Period Models Do Not Consider the Amount of Profit

question 23

True/False

Payback period models do not consider the amount of profit that may be realized after the costs are paid.

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Definitions:

Present Value

A payment’s economically equivalent amount at a prior date, allowing for the time value of money.

Compounded Annually

Describes the process of calculating interest on both the initial principal and the accumulated interest from previous periods once a year.

Present Value

The present value of a future amount of money or series of cash flows using a predetermined rate of return.

Perpetuity

A financial term for a stream of cash payments that continue indefinitely.