The Advantage(s) of the Payback Method of Evaluating Investment Proposals

question 104

Multiple Choice

The advantage(s) of the payback method of evaluating investment proposals is/are:
i. it recognises the time value of money.
ii. it is easy to calculate and understand.
iii. it recognises cash flows beyond the payback period.
Which of the above statements is/are true?

• A) i and ii
• B) ii and iii
• C) ii
• D) All of the given answers

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Definitions:

Interest Expense

The cost incurred by an entity for borrowed funds, representing the interest payable on any borrowings - bonds, loans, convertible debt, or lines of credit.

Consolidated Net Income

The total earnings of a parent company and its subsidiaries, after taxes and interest, reported as a single figure.

Noncontrolling Interest

Noncontrolling interest is the portion of equity interest in a subsidiary not held by the parent company, reflecting the equity ownership of minority shareholders.