The primary advantage of the payback period is that:
A) it calculates the amount required to attain a capital asset.
B) it incorporates the time value of money.
C) it allows easy comparisons of alternatives.
D) it incorporates all cash flows that occur after the payback period.

Question

Quizplus · Accepted Answer

The primary advantage of the payback period is that it allows easy comparisons of alternatives. It is a simple method that calculates the time required to recover the initial investment. Since it is easy to calculate and understand, it is widely used for decision-making purposes. However, it does not take into account the time value of money or the cash flows that occur after the payback period.

The Primary Advantage of the Payback Period Is That