A Disadvantage of Using the Payback Period to Compare Investment

question 147

Multiple Choice

A disadvantage of using the payback period to compare investment alternatives is that:

• A) It ignores cash flows beyond the payback period.
• B) It includes the time value of money.
• C) It cannot be used when cash flows are not uniform.
• D) It cannot be used if a company records depreciation.
• E) It cannot be used to compare investments with different initial investments.

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Definitions:

Nonrepetitive Requirements

Needs or orders that are not regular or predictable and often relate to unique projects or one-time events.

Acquisition

The act of obtaining control of another company or significant assets through purchase or merger, often to expand business operations.

Sustainability Criteria

Guidelines or principles for making decisions that consider long-term environmental stability, economic viability, and social equity.

Environmental Considerations

Factors related to the natural environment that are taken into account in decision-making and business practices.