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:

Rhizome

Stem that grows horizontally along or under the ground.

Underground Stem

A type of stem that grows horizontally below the soil surface, such as a tuber or rhizome, playing a crucial role in vegetative reproduction.

Corm

A swollen underground stem or base serving as a storage organ, used by some plants to survive winter or drought conditions.

Underground Stem

A type of stem that grows below the surface of the soil, helping in vegetative reproduction and nutrient storage, as seen in tubers and rhizomes.