which of the tolowing statements s CORRECT? Select one . a One drawcback of the

Question

which of the tolowing statements s CORRECT? Select one . a One drawcback of the payback methiod is that this method does nol consies casow hat occur beyond the payback pernod b These u ar payback ignores cash f ws beyond the paybe k pend butte scorted but the a back method overcomes rhis problem c if a proedts payoack is a postive number,then the prolect should be aecepted because ut he a ostve N o d The shoter a projects payback penod.the ess sesirabie the proec is.nomally comsdered to be by hs cmeion

Explanation / Answer

Answer is A.

Payback period ignores cashflows that occur beyond the payback period, this disadvantage exists even in discounted pay back method though it considers time value of money. Projects with positive NPV are not must to be considered, depends on the project period and IRR when compared with other projects. Mostly projects with less payback period are generally considered for further evaluation.

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