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Author Question: All of the following are considered to be disadvantages of using the payback method EXCEPT the fact that it (Read 24 times)

Evvie72

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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.
Corporate Finance Online ¦ Eakins, McNally ¦ 2nd Edition
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Marked as best answer by Evvie72 on Apr 25, 2021

babybsemail

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Reply #1 on: Apr 25, 2021
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Evvie72

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Reply 2 on: Apr 25, 2021
Wow, this really help

cici

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Reply 3 on: Yesterday
Great answer, keep it coming :)

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