Which of the following statements is correct?
A) A weakness of both payback and discounted payback is that neither accounts for cash flows received after the payback.
B) Discounted payback uses a more aggressive reinvestment rate assumption than payback.
C) Neither payback nor discounted payback uses time value of money concepts.
D) None of the statements are correct.

Question

Quizplus · Accepted Answer

The payback and discounted payback methods both ignore cash flows that occur after the payback period, which is a limitation of these methods. Discounted payback does consider the time value of money by discounting the cash flows, unlike the regular payback method.

Which of the Following Statements Is Correct