Question

The discounted payback period of a project will a. decrease whenever the initial cash outlay for the project is increased. b. amount of each projected cash inflow is decreased. c. discount rate applied to the project is decreased. d. time period of the project is increased. e. costs of the fixed assets utilized in the project increase.

Answer 1

The correct question is:

The discounted payback period of a project will decrease whenever the:

a. discount rate applied to the project is increased.

b. initial cash outlay of the project is increased.

c. number of cash inflows is increased.

d. amount of each cash inflow is increased.

e. costs of the fixed assets utilized in the project increase

Answer:

d. amount of each cash inflow is increased.

Explanation:

Discounted cash flow of a project is an analysis that considers the time value of money, future cash inflows re calculated as a discount of present value.

Discounted payback period is how long it will take for future cash flows to meet a certain amount.

For example if $100 is estimated to be $200 in 10 months at future inflows of $10 per month (that is $10*10 months= $100 profit)

If the inflow is now increased to $20 it will reduce repayment time from 10 months to 5 months (that is $20* 5months = $100 profit)