header bg

Scan QR code or get instant email to install app

Question:

Which project selection method is the LEAST precise?

A Payback period.
explanation

The payback period is a simple method that calculates the time it takes for an investment to generate enough cash flows to recover the initial investment cost. It focuses solely on the time it takes to recoup the investment and does not take into account the time value of money or the profitability of the project beyond the payback period. By only considering the time it takes to recover the investment, the payback period method ignores important factors such as the project's profitability, cash flows occurring after the payback period, and the risk associated with the project. It fails to consider the present value of future cash flows, which can lead to flawed investment decisions.

Related Information

Comments

Leave a Reply

Your email address will not be published. Required fields are marked *

*