Which of These Is a Disadvantage of the Payback Method

question 9

Multiple Choice

Which of these is a disadvantage of the payback method of investment evaluation?

• A) It disregards the time value of money.
• B) It disregards the post-payback-period cash flows.
• C) It is based on cash flows.
• D) A and B

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Definitions:

Degrees of Freedom

The number of independent values or quantities which can be assigned to a statistical distribution, often related to the number of values in the final calculation of a statistic that are free to vary.

F Distribution

A probability distribution that arises frequently as the null distribution of a test statistic, especially in the context of variance analysis or ANOVA.

Numerator

The top number in a fraction that represents the part of the whole or the dividend in division.

Test Statistic

A value calculated from sample data to evaluate a hypothesis about a population parameter.