When the net annual cash flows are EQUAL, the cash payback period is computed by

ID: 1226562 • Letter: W

Question

When the net annual cash flows are EQUAL, the cash payback period is computed by dividing the cost of the capital investment by the:

A) annual net income

B) net annual cash flow

C) present value of the cash flow

D) present value of the net income

If a payback period for a project is greater than its exected useful life, the

A) project will always be profitable

B) entire initial investment will not be recovered

C) project would only be acceptable if thecompanies cost of capital was low

D) project's return will always exceed the company's cost of capital

1.B.net annual cash flow

Payback Period = Cost of Project / Annual Cash Inflows

2. B. Entire initial investment will not be recovered.

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