Which One of the Following Statements About the Payback Method

question 103

Multiple Choice

Which one of the following statements about the payback method of capital budgeting is correct?

• A) The payback method does NOT consider the time value of money.
• B) The payback method considers cash flows after the payback has been reached.
• C) The payback method uses discounted cash flow techniques.
• D) The payback method will lead to the same decision as other methods of capital budgeting.

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Definitions:

Lowest Opportunity Cost

The situation where choosing one option incurs the smallest possible loss of potential benefits from other alternatives, a key concept in comparative advantage and economic decision-making.

Fewest Resources

The condition of having the minimal amount of resources, including labor, capital, and natural resources, required for production.

Opportunity Cost

The missed opportunity to benefit from other choices when selecting a particular option.

Pages

Typically refers to sheets of paper bound together within a book, or the digital equivalent in documents, used to display printed or written material.