Four of the following statements are truly disadvantages of the regular payback method,but one is not a disadvantage of this method.Which one is NOT a disadvantage of the payback method?
A) Lacks an objective,market-determined benchmark for making decisions.
B) Ignores cash flows beyond the payback period.
C) Does not directly account for the time value of money.
D) Does not provide any indication regarding a project's liquidity or risk.
E) Does not take account of differences in size among projects.

Question

Quizplus · Accepted Answer

The payback method does provide an indication regarding a project's liquidity because it measures how quickly the initial investment can be recovered, which is directly related to liquidity. The other options (A, B, C, E) correctly identify disadvantages of the payback method.

Four of the Following Statements Are Truly Disadvantages of the Regular