Question

The length of time needed to recover the initial investment once time value of money is considered is called the:

A. Discounted payback period.
B. Average accounting return period.
C. Discounted net present value period.
D. Payback period.
E. Internal time interval.

Answer 1

The length of time needed to recover the initial investment once time value of money is considered is called the discounted payback period.

Step-by-step explanation:

The length of time needed to recover the initial investment once time value of money is considered is called the discounted payback period.

The discounted payback period takes into account the time value of money by discounting future cash flows back to their present value. It calculates the amount of time it will take for the discounted cash flows to equal the initial investment.

For example, let's say you invest $10,000 in a project that is expected to generate $1,000 per year for the next 8 years. To calculate the discounted payback period, you would discount each $1,000 cash flow back to its present value using an appropriate discount rate, and then sum up the discounted cash flows until they equal or exceed the initial investment of $10,000.