ECONOMICS

Detailed explanation-1: -For calculating payback period for an annuity, all cash flows must be adjusted for time value of money. If a project’s payback period is less than the maximum acceptable payback period, we would accept it. If a project’s payback period is greater than the maximum acceptable payback period, we would reject it.

Detailed explanation-2: -The payback period is the length of time it takes to recover the cost of an investment or the length of time an investor needs to reach a breakeven point. Shorter paybacks mean more attractive investments, while longer payback periods are less desirable.

Detailed explanation-3: -For a conventional project, payback period is always lower than discounted payback period. It’s because the calculation of the discounted payback period takes into account the present value of future cash inflows. So, based on this criterion, it’s going to take longer before the original investment is recovered.

Detailed explanation-4: -Detailed Solution. Explanation: The payback method simply projects incoming cash flows from a given project and identifies the break-even point between profit and paying back invested money for a given process. Explanation: The payback period refers to the amount of time it takes to recover the cost of an investment.