Choice "D" is correct. The payback period computation ignores cash flows after the initial investment has been recovered. The payback method focuses on liquidity and the time it takes to recover the initial investment.
Choice "c" is incorrect. The discounted payback period considers the time value of money but, like any other payback method, it ignores cash flows after the initial investment has been recovered.
Choice "a" is incorrect. The net present value method measures the amount of absolute return and not a rate. Although a positive net present value would confirm that the entity's investment exceeds the hurdle rate established by management, it neither measures the rate specifically nor assumes a hurdle rate equal to the incremental borrowing rate.
Choice "b" is incorrect. When using the internal rate of return, the analyst recommends acceptance of the investment in the event that the IRR is greater than the hurdle rate established by management.