Question

Payback occurs when: a. the net cumulative benefits equal the net cumulative costs. b. the net costs are lower than the cumulative benefits. c. the net cumulative benefits minus costs equal one. d. the cumulative benefits are double the cumulative costs.

Answer 1

Option A

Payback occurs when: the net cumulative benefits equal the net cumulative costs.

Explanation:

The payback period is the demanded number of years it will need for a company to recover the cash it spent in a project. The payback period is the interval of time an investment relinquishes a breakeven point. The payback estimation practices cash flows, not net income.

Investors and administrators can handle the payback period to obtain immediate judgments on their purchases. More compressed paybacks mean more engaging investments while more extended payback periods are less profitable. The idea of the payback period is commonly employed in economic and capital budgeting.