Question

which one of the following statements is correct concerning the payback period? question 6 options: an investment should be accepted any time the payback period is less than the discounted payback period, given a positive discount rate. an investment should be accepted if the payback is positive and rejected if it is negative. an investment is acceptable if its calculated payback period is greater than some pre-specified period of time. an investment should be rejected if the payback is positive and accepted if it is negative. an investment is acceptable if its calculated payback period is less than some pre-specified period of time.

Answer 1

An investment is acceptable if its calculated payback period is shorter than a pre-set benchmark, which is the correct statement about payback periods.

Step-by-step explanation:

The correct statement concerning the payback period is that an investment is acceptable if its calculated payback period is less than some pre-specified period of time. The payback period is a tool used to evaluate the time it will take for an investment to generate enough cash flow to cover the initial investment. This method is often used for its simplicity, though it does not take into account the time value of money or cash flows beyond the payback period.

An investment should not be accepted just because the payback period is less than the discounted payback period; the latter takes the time value of money into account, which is critical for sound investment judgement. Similarly, an investment should not be accepted or rejected solely based on whether the payback is positive or negative. Rather, a payback period shorter than a pre-specified benchmark set by the business or investor is generally a condition for acceptance.