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:

Asch's Study

A series of experiments by Solomon Asch that demonstrated the power of conformity in groups, showing that individuals may agree with group consensus even when it contradicts their own senses.

Group Norm

Shared standards, rules, or expectations that influence behavior within a group of people.

Object of Judgement

The entity or individual that is being evaluated or assessed in a particular situation.

Autokinetic Experiment

A psychological experiment where a stationary point of light in a dark room appears to move because of small eye movements, illustrating the effect of suggestion or social influence on beliefs.