An uncovered cost at the start of year is divided by full cash flow during recovery year then added in prior years to full recovery for calculating ____________?
Correct answer: D. payback period
- A. original period
- B. investment period
- C. forecasted period
- D. payback period
Explanation
The payback period equals the number of complete years before recovery plus the unrecovered amount at the start of the recovery year divided by that year's cash flow. This formula identifies the point at which the initial investment is fully recovered.
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