Which of the Following Is a Limitation of the Payback

question 9

Multiple Choice

Which of the following is a limitation of the payback period?

• A)This method is complex to calculate.
• B)The cash flows after the payback period needed for the calculation are difficult to determine.
• C)This method ignores the time value of money.
• D)The discount rate used in the calculation may change before the end of the payback.

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Definitions:

Eliminating Product

The process of removing a product from a company's offerings, often due to low sales, obsolescence, or strategic repositioning.

Segment Margin

A segment’s contribution margin less its traceable fixed costs. It represents the margin available after a segment has covered all of its own traceable costs.

Special Equipment

Custom or unique machinery, tools, or apparatus required for specific tasks or production processes not typically found in generic manufacturing settings.

Variable Costs

Costs that vary directly with the level of production or sales volume, such as raw materials and direct labor.