Which of the following is a limitation of the payback period?
A)This method includes an internal rate of return that is usually less than the required rate of return.
B)The cash flows after the payback period needed for the calculation are not easy to estimate.
C)This method ignores the time value of money.
D)The discount rate used in the calculation often changes.

Question

Quizplus · Accepted Answer

The payback period ignores the time value of money, which means that it does not take into account the fact that money today is worth more than money in the future due to inflation and the potential to earn a return on investment.

Which of the Following Is a Limitation of the Payback