Which of the following statements is false?
A) If the payback period is less than the maximum acceptable payback period, accept the project.
B) If the payback period is less than the maximum acceptable payback period, reject the project.
C) If the payback period is greater than the maximum acceptable payback period, reject the project.
D) If the payback period is the same as the maximum acceptable payback period, accept the project.

Question

Quizplus · Accepted Answer

If the payback period is less than the maximum acceptable payback period, it means that the project is expected to recoup its initial investment within the specified time frame, so it should be accepted. If the payback period is greater than the maximum acceptable payback period, it means that the project will take too long to recoup its initial investment, so it should be rejected. If the payback period is the same as the maximum acceptable payback period, it is a borderline case where further analysis is needed to decide whether to accept or reject the project based on other factors. Therefore, statement B is false because it contradicts the basic principle of the payback period method.

Which of the Following Statements Is False