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

question 38

True/False

The payback period of a project that costs $1,000 initially and promises after-tax cash inflows of $2,000 each year for the next three years is 0.5 years.

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Definitions:

Long-run Equilibrium

A state in which all factors of production and costs are variable, and firms no longer have any incentives to enter or exit the market, resulting in an optimal allocation of resources.

Marginal Cost

The increase in cost resulting from the production of one additional unit of a good or service.

Perfectly Elastic

Describes a market situation where the quantity demanded or supplied changes infinitely with even a slight change in price, indicating extreme sensitivity.

Price-taker Industry

A Price-taker Industry is one in which individual firms have no control over the price of their product and must accept the market price as determined by supply and demand.