Why Is Payback Often Used as the Sole Method of Analyzing

question 65

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)It is the only method where the benefits of the analysis outweigh the costs of that 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:

Marginal Revenue

The additional revenue that a firm receives from selling one more unit of a good or service.

Price Discrimination

A pricing strategy where identical or substantially similar goods or services are sold at different prices by the same provider in different markets or to different buyers.

Economic Profits

The difference between total revenues and total costs, including both explicit and implicit costs, indicating the financial gain realized when accounting for opportunity costs.

Demand Schedule

A table that lists the quantity of a good all consumers in a market will buy at every different price.