Which One of the Following Statements About the Discounted Payback

question 7

Multiple Choice

Which one of the following statements about the discounted payback method is NOT true?

• A) The discounted payback method represents the number of years it takes a project to recover its initial investment.
• B) The discounted payback method calls for a project to be accepted if the payback period is greater than a target period.
• C) The discount payback method is a risk indicator.
• D) The expected cash flows from a project are discounted at the cost of capital.

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Definitions:

Marginal Benefit

The additional satisfaction or utility that a person receives from consuming an additional unit of a good or service.

Marginal Cost

The increase in cost that arises from producing an additional unit of a good or service.

Marginal

Incremental, additional, or extra; used to describe a change in an economic variable.

Incremental

Describes small, gradual changes or increases made over a period of time.