Problems encountered when the payback method is used may include
A) it is only useful when future cash flows are certain.
B) it promotes long-term projects.
C) it neglects the time value of money.
D) it emphasizes short-term projects.
E) it is easy to use.

Question

Quizplus · Accepted Answer

The payback method ignores the time value of money, which means that it does not account for the timing of cash flows or the impact of inflation or interest rates. This can lead to incorrect decisions if the project's cash flows are uncertain or if the project has a long lifespan. The other answer choices are not problems with the payback method.

Problems Encountered When the Payback Method Is Used May Include