   Chapter 15, Problem 3SEQ

Chapter
Section
Textbook Problem

The expected period of time that will elapse between the date of a capital investment and thecomplete recovery of the amount of cash investedis called:A.The average rate of return periodB.The cash payback periodC.The net present value periodD.The internal rate of return period

To determine

Concept Introduction:

Payback Period:

Payback period is the period in which the project recovers its initial cost of the investment. It can be calculated by dividing the initial investment by the annual cash inflow from the project.

To choose:

The correct term for the expected period of time that will elapse between the date of a capital investment and the complete recovery of amount of cash invested

Explanation

Explanation for correct answer:

The Cash payback period is the expected period of time that will elapse between the date of a capital investment and the complete recovery of amount of cash invested. Hence the correct option is B.

Explanation for incorrect answers:

A. Average rate of return is the Average accounting profit % earned on the investment. Hence this option is incorrect...

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