Which of These Is Not True for the Payback Method

question 6

Multiple Choice

Which of these is not true for the payback method of investment analysis?

• A) It does not consider the time value of money.
• B) It does not consider project profitability.
• C) It is relatively simple to calculate.
• D) The longer the payback period the better.

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Definitions:

Equation of Exchange

An economic formula representing the relationship between the money supply, the velocity of money, the price level, and the number of transactions in an economy.

Money Supply

The entire stock of money assets in an economy at a specified period.

Velocity of Money

The rate at which money is exchanged in an economy and is used to measure the activity level of economic transactions.

Nominal Gross Domestic Product

The total market value of all finished goods and services produced within a country's borders in a specific time period, evaluated at current market prices without adjusting for inflation.