Question

If two mutually exclusive investment projects have identical payback periods but generate different total cash inflows over their respective lifespans, how will the traditional Payback Period method evaluate them?

A It will favour the project with higher total cash inflows over its life. Correct Answer Incorrect Answer
B will be indifferent between the two projects Correct Answer Incorrect Answer
C It will favour the project with higher initial investment Correct Answer Incorrect Answer
D It will switch to the discounted payback method for decision-making. Correct Answer Incorrect Answer

Solution

The correct answer is B

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