Which of the Following Statement Regarding the Payback Method Is

question 16

Multiple Choice

Which of the following statement regarding the payback method is incorrect?

• A)The payback period is the amount of time it takes for a capital investment to "pay for itself."
• B)In general,projects with longer payback periods are safer investments than those with shorter payback periods.
• C)When cash flows are equal each year,the payback period is calculated by dividing the initial investment in the project by its annual cash flow.
• D)The payback method is often used as a screening tool for potential investments.

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Definitions:

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