Question
How does the timing and the size of cash flows affect the payback method? Assume the project does pay back within the project's lifetime.
Multiple choice question.
An increase in the size of the first cash inflow will decrease the payback period, all else held constant.
The timing but not the size of the cash flows affects the payback period.
A delay in receiving the cash inflows will decrease the payback period.
Receiving every cash inflow sooner will increase the payback period, all else held constant.
Multiple choice question.
An increase in the size of the first cash inflow will decrease the payback period, all else held constant.
The timing but not the size of the cash flows affects the payback period.
A delay in receiving the cash inflows will decrease the payback period.
Receiving every cash inflow sooner will increase the payback period, all else held constant.
Answers
GPT-4o mini
The correct answer is:
**An increase in the size of the first cash inflow will decrease the payback period, all else held constant.**
This statement highlights how increasing the initial cash inflow reduces the time required to recover the initial investment, subsequently leading to a shorter payback period. The other options do not correctly convey the relationship between cash flow timing, size, and the payback method.
**An increase in the size of the first cash inflow will decrease the payback period, all else held constant.**
This statement highlights how increasing the initial cash inflow reduces the time required to recover the initial investment, subsequently leading to a shorter payback period. The other options do not correctly convey the relationship between cash flow timing, size, and the payback method.