Why Is Payback Often Used as the Sole Method of Analyzing

question 9

Multiple Choice

Why is payback often used as the sole method of analyzing a proposed small project? 

• A) Payback considers the time value of money. 
• B) All relevant cash flows are included in the payback analysis. 
• C) The benefits of payback analysis usually outweigh the costs of the analysis. 
• D) Payback is the most desirable of the various financial methods of analysis. 
• E) Payback is focused on the long-term impact of a project. 

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Definitions:

Margin

The difference between the selling price of a product and the cost of producing it, often expressed as a percentage of the selling price.

Labor Supply Curve

A graphical representation showing the relationship between the wage rate and the quantity of labor that workers are willing to supply.

Opportunity Cost

The cost of forgoing the next best alternative when making a decision.

Labor Supply Curve

A graphical representation showing the relationship between the quantity of labor that workers are willing to provide and the wage rate.