One Criticism of the Payback Method Is That It Ignores

question 22

True/False

One criticism of the payback method is that it ignores cash flows that occur after the payback point has been reached

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Definitions:

Cash Payback Period

The cash payback period is the duration of time it takes for an investment to generate enough cash flow to recover its original cost.

Residual Value

The estimated salvage value of an asset at the end of its useful life.

Present Value Factors

Multipliers used to calculate the present value of a future amount of money or stream of cash flows.

Compound Interest

Interest calculated on the initial principal and also on the accumulated interest of previous periods.