The advantages of the payback method of project analysis include the: I. application of a discount rate to each separate cash flow.
II) bias towards liquidity.
III) ease of use.
IV) arbitrary cutoff point.
A) I and II only
B) I and III only
C) II and III only
D) II and IV only
E) II, III, and IV only

Question

Quizplus · Accepted Answer

The payback method is advantageous because it is easy to use (III) and has a bias towards liquidity (II), as it focuses on how quickly the initial investment can be recovered. However, it does not apply a discount rate to cash flows (I) and the cutoff point is considered a disadvantage, not an advantage.

The Advantages of the Payback Method of Project Analysis Include