The regular payback method has a number of disadvantages,some of which are listed below.Which of these items is NOT a disadvantage of this method?
A)It lacks an objective, market-determined benchmark for making decisions.
B)It ignores cash flows beyond the payback period.
C)It does not directly account for the time value of money.
D)It does not provide any indication regarding a project's liquidity.

Question

Quizplus · Accepted Answer

This item is a disadvantage of the payback method, as it does not provide any information regarding a project's liquidity. A project's liquidity measures its ability to meet short-term obligations and cash flow needs. The payback method only focuses on the time it takes to recoup the initial investment and does not take into account any future cash flows beyond that. Therefore, it does not provide any information on a project's liquidity. A, B, and C are all valid disadvantages of the payback method.

The Regular Payback Method Has a Number of Disadvantages,some of Which