If a project is acceptable using the net present value criteria,then it will also be acceptable under the less stringent criteria of the payback period.

Question

Quizplus · Accepted Answer

The statement is false. The net present value (NPV) method takes into account the time value of money and discounts future cash flows to their present values using a discount rate. On the other hand, the payback period only looks at the time it takes to recover the initial investment. Therefore, a project that has a positive NPV may have a longer payback period than a project with a lower NPV. So, just because a project has a positive NPV, it does not necessarily mean that it will meet the payback period criteria.

If a Project Is Acceptable Using the Net Present Value