Which of the statements below is FALSE? A. To account for the time value of mone

Question

Which of the statements below is FALSE? A. To account for the time value of money with the Payback Period Model, the future cash flow needs to be restated in current dollars. B. The Discounted Payback Period method is the time it takes to recover the initial investment in future dollars. C. When we discount a future cash flow with our standard time-value-of-money concepts, we inherently assume that the entire cash flow was received at the end of the year. D. The Discounted Payback Period method does not correct for the cash flow after the recovery of the initial outflow.

Explanation / Answer

Discounted payback method converts the future cash flos into present value cash flows and then calculates the payback period with discounted cash flows.

Hence, correct option is B. The Discounted Payback Period method is the time it takes to recover the initial investment in future dollars.

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