A Project Has a Required Payback Period of Three Years

question 14

Multiple Choice

A project has a required payback period of three years.Which one of the following statements is correct concerning the payback analysis of this project?

• A)The cash flows in each of the three years must exceed one-third of the project's initial cost if the project is to be accepted.
• B)The cash flow in year three is ignored.
• C)The project's cash flow in year three is discounted by a factor of (1 + R)³.
• D)The cash flow in year two is valued just as highly as the cash flow in year one.
• E)The project is acceptable whenever the payback period exceeds three years.

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