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The discounted payback period does not take into account the time value of money. Group of...

The discounted payback period does not take into account the time value of money.

Group of answer choices

True

False

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Answer #1

The correct option is False.

Unlike the payback method where time value of money is ignored;the discounted payback method considers time value of money to bring future cash flows to present value at specified interest rate.This cumulative cash flow is then used to compute discounted payback method in the following manner:

Discounted Payback period=Last period with a negative cumulative cash flow+(Absolute value of cumulative cash flows at that period/Cash flow after that period).

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