Which Three of the Following Are Drawbacks of Payback

question 21

Multiple Choice

Which three of the following are drawbacks of payback?

• A) Cash flows beyond the payback cut- off are ignored.
• B) The cut- off point is arbitrarily selected: it has no theoretical base.
• C) It is difficult to calculate and interpret.
• D) It fails to allow for the time value of money.

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Definitions:

Capitalist States

Countries where economic systems are based on private ownership and the free market determines allocation of resources.

Authoritarian States

Nations where political power is concentrated in a single authority, with limited personal freedoms.

Individual Wealth

The total value of all assets owned by a single person, minus any debts.

Communism

A political and economic ideology that aims at creating a classless society in which the means of production are owned and controlled by the community as a whole.