Question

If a payback period for a project is greater than its expected useful life, the ___________.

Group of answer choices:
a. project would only be acceptable if the company's cost of capital was low.
b. project's return will always exceed the company's cost of capital.
c. project will always be profitable.
d. entire initial investment will not be recovered.

Answer 1

Answer: d. Entire initial investment will not be recovered.

Step-by-step explanation:

The Payback period by definition is the amount of time it will take a Project to recover the initial investment into it. For example, if a project had an investment of $20 million and made $5 million every year, the Payback period would be 4 years.

Now, if the amount of time it will take to recover an investment is longer than the expected amount of time the project will run (expected useful life) then logically speaking that would mean that the Investment would not be entirely recovered because the project will be done before it can pay off the investment hence Option D is correct.