The Payback Period Rule

question 8

Multiple Choice

The payback period rule:

• A) determines a cutoff point so that all projects accepted by the NPV rule will be accepted by the payback period rule.
• B) determines a cutoff point so that depreciation is just equal to positive cash flows in the payback year.
• C) requires an arbitrary choice of a cut-off point.
• D) varies the cut-off point with the interest rate.

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Definitions:

Diameter

A straight line passing through the center of a circle or sphere and terminating at both circumferences, representing the widest distance across it.

Thickness

The dimension from one surface of an object to the opposite surface, measured perpendicular to the surfaces.

LMC

Least Material Condition; a condition of a feature which contains the minimum amount of material yet still meets the specified limits of size.

Freedom of Assembly

The ease with which parts can be put together, denoting flexibility in assembly operations.