Which one of the following statements about the discounted payback method is false?
A) The discounted payback method represents the number of years it takes a project to recover its initial investment.
B) The discounted payback method calls for a project to be accepted if the payback period is greater than a target period.
C) The discount payback method is a risk indicator.
D) The expected cash flows from a project are discounted at the cost of capital.

Question

Quizplus · Accepted Answer

The discounted payback method calls for a project to be accepted if the payback period is less than or equal to a target period, not greater than a target period. This statement is false. The rest of the statements are true. The discounted payback method considers the time value of money by discounting the expected cash flows at the cost of capital, and it represents a risk indicator since projects with shorter payback periods are less risky.

Which One of the Following Statements About the Discounted Payback