Question

Which of the following statements concerning the payback period is NOT true     A.   The payback...

Which of the following statements concerning the payback period is NOT true

    A.  

The payback period is simple to calculate and understand.

    B.  

The payback period measures the time that a project will take to generate enough cash flows to cover the initial investment.

    C.  

The payback period ignores cash flows after the payback period has been achieved.

    D.  

The payback period takes account of the time value of money.

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Answer: D) The payback period takes account of the time value of money.

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

Payback Period

The payback period measures the time that a project will take to generate enough cash flows to cover the initial investment. The shorter the payback, the more desirable the investment. If longer payback, then less desirable it is. For example, if a project cost $50,000 to implement and the returns (cash flows) are $10,000 per year,then it would take 5 years to reach the payback period.

----

Hope you understood.

Thank you.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Concerning payback, which of the following statements is true? a) Payback is no longer used since...
Concerning payback, which of the following statements is true? a) Payback is no longer used since it ignores the time value of money. b) Payback can only be used on simple projects since it cannot deal with cash flow. c) Payback period varies inversely with the benefit-cost ratio: the shorter the payback period, the higher the benefit-cost. d) Payback is only used for capital intensive projects.
Which of the following statements about the "payback period" is true? The payback period fails to...
Which of the following statements about the "payback period" is true? The payback period fails to produce an objective decision to accept or reject an individual project. The payback period considers the time value of money. The payback period uses discounted cash-flow techniques. The payback period considers cash flows after the payback has been reached.
Which of the following is not true of the payback period method? Group of answer choices...
Which of the following is not true of the payback period method? Group of answer choices There is no objective criterion for what is an acceptable payback period. It fails to take into account a project’s net cash flows. It fails to take into account the time value of money. It fails to take into account a project’s net cash flows after the payback period.
Which one of the following statements is correct? A longer payback period is preferred over a...
Which one of the following statements is correct? A longer payback period is preferred over a shorter payback period. The payback rule states that you should accept a project if the payback period is less than one year. The payback period ignores the time value of money. The payback rule is biased in favor of long-term projects. The payback period considers the timing and amount of all of a project's cash flows.
11. The NPV and payback period What information does the payback period provide? A project’s payback...
11. The NPV and payback period What information does the payback period provide? A project’s payback period (PB) indicates the number of years required for a project to recover its initial investment using its operating cash flows. As the theoretical soundness of the conventional (undiscounted) PB technique was criticized, the model was modified to incorporate the time value of money-adjusted operating cash flows to create the discounted payback method. While both payback models continue to reflect faulty ranking criteria, they...
Payback period essentially provides the number of years it would take for a project to recover...
Payback period essentially provides the number of years it would take for a project to recover the initial investment from its operating cash flows. As the model was criticized, the model evolved incorporating time value of money to create the discounted payback method. The models still reflected faulty ranking criteria but they provided important information about liquidity and risk. Cash flows expected in the distant future aremore   risky than cash flows received in the near-term—which suggests that the payback period...
Payback period essentially provides the number of years it would take for a project to recover...
Payback period essentially provides the number of years it would take for a project to recover the initial investment from its operating cash flows. As the model was criticized, the model evolved incorporating time value of money to create the discounted payback method. The models still reflected faulty ranking criteria but they provided important information about liquidity and risk. Cash flows expected in the distant future are more/less risky than cash flows received in the near-term—which suggests that the payback...
Four of the following statements are truly disadvantages of the regular payback method, but one is...
Four of the following statements are truly disadvantages of the regular payback method, but one is not a disadvantage of this method. Which one is NOT a disadvantage of the payback method? a. Ignores cash flows beyond the payback period. b. Does not directly account for the time value of money. c. Does not provide any indication regarding a project’s liquidity or risk. d. Lacks an objective, market-determined benchmark for making decisions. e. Does not take account of differences in...
7. The NPV and payback period What information does the payback period provide? Suppose Extensive Enterprises’s...
7. The NPV and payback period What information does the payback period provide? Suppose Extensive Enterprises’s CFO is evaluating a project with the following cash inflows. She does not know the project’s initial cost; however, she does know that the project’s regular payback period is 2.5 years. Year Cash Flow Year 1 $325,000 Year 2 $500,000 Year 3 $450,000 Year 4 $450,000 If the project’s weighted average cost of capital (WACC) is 8%, what is its NPV? $367,583 $312,446 $404,341...
The NPV and payback period Suppose you are evaluating a project with the cash inflows shown...
The NPV and payback period Suppose you are evaluating a project with the cash inflows shown in the following table. Your boss has asked you to calculate the project’s net present value (NPV). You don’t know the project’s initial cost, but you do know the project’s regular, or conventional, payback period is 2.50 years. The project's annual cash flows are: Year Cash Flow Year 1 $400,000 Year 2 600,000 Year 3 500,000 Year 4 475,000 If the project’s desired rate...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT