Discussion
The payback period of an investment is
Answer: B
Correct answer: Time for cumulative inflow to equal the outlay
The payback period is how long the investment takes to return its own cost:
\[ \text{Payback} = \frac{\text{Initial outlay}}{\text{Annual net cash inflow}} \]It is simple and widely used as a first screen, but it ignores everything after the payback point and takes no account of the time value of money.
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