A weakness of the payback method of project evaluation is that it:
A)fails to take account of the magnitude and timing of the cash flows.
B)rejects all projects with a payback period greater than the maximum payback period.
C)rejects all projects with a payback period less than the maximum payback period.
D)fails to take account of the timing of cash flows,but does take into account the magnitude of cash flows.

Question

Quizplus · Accepted Answer

The weakness of the payback method is that it only considers the payback period and ignores the magnitude and timing of cash flows. This means that it may favor short-term projects even if they have lower profitability, which could result in missed opportunities for more long-term and profitable investments.

A Weakness of the Payback Method of Project Evaluation Is