Question

Which of the following decision rules has the advantage that the information needed for the calculation is readily available? Select one:

a. Net present value
b. Average accounting return
c. Payback period
d. Internal rate of return
e. Discounted payback

Answer 1

Among the given options, the payback period is the decision rule with information most readily available for calculation, as it requires only the initial investment cost and annual cash inflows.

Step-by-step explanation:

The decision rule that has the advantage that the information needed for calculation is readily available is the payback period. The payback period reflects the time it will take for savings from an investment to equal the initial capital cost. The information for calculating the payback period is typically the initial investment cost and the annual cash inflows, which are usually more straightforward to estimate compared to other decision rules such as the net present value or internal rate of return which require more complex financial calculations and estimates of future cash flows and discount rates.