Discussion
Comparing the discounted with the simple payback period, the discounted form
Answer: A
Correct answer: gives a longer period and accounts for interest
Discounting reduces each receipt before it is counted, so more of them are needed to reach the first cost and the period is always longer at any positive rate - six years against four in the example above. The improvement is real but partial: the method now respects the time value of money while still ignoring everything beyond the payback point.
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