Which of the following is NOT a true statement?
A) The payback rule ignores the time value of money.
B) The discounted payback rule requires a cutoff hurdle be set.
C) The proﬁtability index is closely related to the payback period.
D) The AAR is based on accounting data.
E) There may be multiple IRRs for an independent project.

Question

Quizplus · Accepted Answer

The proﬁtability index is not closely related to the payback period. While both metrics are used to evaluate the profitability of investment projects, they are calculated differently and focus on different aspects of the investment. The payback period measures the time it takes for an investment to recoup its initial cost, while the profitability index calculates the ratio of present value of future cash flows to the initial investment.

Which of the Following Is NOT a True Statement