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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.

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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.

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