Which one of the following statements is correct?
A)A longer payback period is preferred over a shorter payback period.
B)The payback rule states that you should accept a project if the payback period is less than one year.
C)The payback period ignores the time value of money.
D)The payback rule is biased in favour of long-term projects.
E)The payback period considers the timing and amount of all of a project's cash flows.

Question

Quizplus · Accepted Answer

The payback period ignores the time value of money, which makes it a flawed method for evaluating investment projects. Other methods, such as net present value and internal rate of return, take into account the time value of money and are therefore more reliable.

Which One of the Following Statements Is Correct