The Payback Period of a Project That Costs $1,000 Initially

question 81

True/False

The payback period of a project that costs $1,000 initially and promises after-tax cash inflows of $300 for the next three years is 3.33 years.

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Definitions:

MP

Marginal Product, which refers to the increase in output that results from employing an additional unit of input, holding all other inputs constant.

Average Fixed Cost

Average Fixed Cost refers to the total fixed costs (costs that do not change with the level of output) divided by the quantity of output produced. It decreases as production increases.

Total Variable Cost

The total of expenses that vary directly with the level of production, such as raw materials and direct labor.

Marginal Product

The additional output resulting from the use of one more unit of a production input, keeping other inputs constant.