Payback is best used to evaluate which type of projects?
A)Low-cost, short-term
B)High-cost, short-term
C)Low-cost, long-term
D)High-cost, long-term
E)Any size of long-term project

Question

Quizplus · Accepted Answer

Payback is best used to evaluate low-cost, short-term projects because it focuses on the time it takes to recoup the initial investment, rather than considering long-term cash flows or the time value of money. Projects with a relatively low initial investment and a short payback period are likely to be less risky and more attractive to investors. For high-cost, long-term projects, other methods such as Net Present Value (NPV) or Internal Rate of Return (IRR) would be more appropriate to evaluate the project's profitability and feasibility.

Payback Is Best Used to Evaluate Which Type of Projects