contestada

What is a disadvantage of the payback method?
a.
It is difficult to calculate
b. It ignores cash inflows earned after the payback period and time-value of money
c.
It ignores cash inflows earned before the payback period.
d. It can be used to cheaply separate desirable projects from less desirable ones.
Clear my choice

Respuesta :

The statement " It eliminates the inflows of cash earned following the payback period and time value of money" is the disadvantage of the payback method

The payback period is the period thats tells the time period in which the initial investment that was made should be recovered.

It is to be measured in years normally.

For finding the disadvantage, we need to find out the following information related payback period

  1. It is easy to calculate
  2. The cash flows earned after the payback period should not be used
  3. There is no requirement to determine the present value factor for measuring the payback period.
  4. Also, it does not use for distinct cheap projects from lower ones

So this is the reason this method ignored the times value of money

Therefore, we can conclude that, the correct option is b.

Learn more about the payback method here: https://brainly.com/question/16255939

Otras preguntas