Which of the following statements is CORRECT? Select one: a. One drawback of the

Question

Which of the following statements is CORRECT? Select one: a. One drawback of the payback method is that this method does not consider cash flows that occur beyond the payback period. b. If a project's payback is a positive number, then the project should be accepted because it must have a positive NPV. c. The regular payback ignores cash flows beyond the payback period, but the discounted payback method overcomes this problem. d. The shorter a project's payback period, the less desirable the project is normally considered to be by this criterion.

Explanation / Answer

Payback period considers the cash flows only upto payback period. It does not consider the cash flows beyond payback perid.

Hence, correct option is a. One drawback of the payback method is that this method does not consider cash flows that occur beyond the payback period.

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