Certification of Capability in Business Analysis (CCBA) — Question 27

A business analyst is studying the cost of the endeavor in relation to the projected income the endeavor will bring once the project is completed. What financial valuation technique can the business analyst use to determine the breakeven point for the project?

Answer options

• A. Payback period
• B. Average rate of return
• C. Cost-benefit analysis
• D. Discounted cash flow

Correct answer: A

Explanation

The payback period is the time it takes for an investment to generate an amount of income equal to the initial cost, making it the correct choice for determining the breakeven point. The average rate of return focuses on profitability over time rather than the breakeven aspect. Cost-benefit analysis evaluates overall benefits against costs, while discounted cash flow assesses the value of future cash flows but does not specifically identify the breakeven point.