Author Question: All of the following are considered to be disadvantages of using the payback method EXCEPT the fact that it (Read 45 times)

Evvie72 · **on:** Apr 25, 2021

Question 1

A firm is evaluating a proposal which has an initial investment of $35,000 and has cash flows of $10,000 in year 1, $20,000 in year 2, and $10,000 in year 3. The payback period of the project is
◦ 1 year.
◦ 2 years.
◦ between 1 and 2 years.
◦ between 2 and 3 years.

Question 2

All of the following are considered to be disadvantages of using the payback method EXCEPT the fact that it
◦ ignores the time value of money.
◦ has no clearly defined decision rule.
◦ does not consider cash flows that occur beyond the payback period.
◦ does not adjust for risk.
◦ does not provide a good measure of the project's liquidity.

babybsemail · **Reply #1 on:** Apr 25, 2021

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