Payback Is Frequently Used to Analyze Independent Projects Because

question 29

Multiple Choice

Payback is frequently used to analyze independent projects because:

• A) it considers the time value of money.
• B) all relevant cash flows are included in the analysis.
• C) it is easy and quick to calculate.
• D) it is the most desirable of all the available analytical methods from a financial perspective.

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Definitions:

Cash Flow

The net amount of cash being transferred into and out of a business, which is used to maintain the company's operations.

Operating Activities

Business actions directly related to its day-to-day operations, such as selling products or services, which generate revenue and expenses.

Amortization Expense

The systematic allocation of the cost of an intangible asset over its useful life.

Book Value

The value of an asset according to its balance sheet account balance, which represents the cost of the asset minus any depreciation, amortization, or impairment costs.