Answer (D) is correct . The payback reciprocal (1 ¡Â payback) has been shown to approximate the internal rate of return (IRR) when the periodic cash flows are equal and the life of the project is at least twice the payback period.Answer (A) is incorrect because The payback reciprocal is not related to the profitability index.
Answer (B) is incorrect because The payback reciprocal approximates the IRR, which is the rate at which the NPV is $0.
Answer (C) is incorrect because The accounting rate of return is based on accrual-income based figures, not on discounted cash flows.
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