The choice to accept or reject projects based on the payback period ____.
A) is an objective decision
B) is a subjective decision
C) will always give the same results as when using the net present value method
D) will always give the same results as when using the internal rate of return method

Question

Quizplus · Accepted Answer

The choice to accept or reject projects based on payback period is a subjective decision because it does not take into account the time value of money, and relies solely on the length of time it takes to recoup the initial investment. It can lead to incorrect decisions if projects with longer payback periods are rejected even though they may have higher net present value or internal rate of return.

The Choice to Accept or Reject Projects Based on the Payback