The payback method:
A) Entails diﬃcult computations.
B) Is prejudiced towards short-term projects.
C) Always applies a ten year cut-off point for cash ﬂows.
D) Adjusts for the risk level inherent in a project.
E) Is generally used only for large projects.

Question

Quizplus · Accepted Answer

The payback method measures the length of time it takes to recover the initial investment in a project, and does not take into account any cash flows beyond the payback period. As a result, it is biased towards projects with shorter payback periods, which may not necessarily be the most profitable in the long run.

The Payback Method