Without using formulas, provide a definition of payback period.

Multiple Choice

• A project analysis tool that determines the amount of time required for an investment to generate cash flows to recover its initial cost.

• A project analysis tool that measures the acceptability of a project by determining the length of time required for an investment's discounted cash flows to equal its initial cost.

• A project analysis tool that measures the acceptability of a project through the difference between a project's initial investment and whether the present value of its cash flow will repay the investment.

• A project analysis tool that measures the acceptability of a project by determining the amount of profit that can be expected based on an investment made.