Four of the following statements are truly disadvantages of the regular payback

Question

Four of the following statements are truly disadvantages of the regular payback method, but one is not a disadvantage of this method. Which one is NOT a disadvantage of the payback method?

a. Does not provide any indication regarding a project's liquidity or risk. b. Does not take account of differences in size among projects. c. Ignores cash flows beyond the payback period. d. Does not directly account for the time value of money. e. Lacks an objective, market-determined benchmark for making decisions.

Explanation / Answer

Regular paybacl calculates the paybak period of the project without considering the time value of money. It does not evaluate either liquidity or risk.

Hence, correct option is a. Does not provide any indication regarding a project's liquidity or risk.

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