Which of the following statements regarding the discounted payback period measure is true?
A)The discounted payback measure uses the time value of money concept.
B)The discounted payback measure is better than the NPV rule.
C)The discounted payback measure considers all cash flows.
D)The discounted payback measure exhibits the value additivity property.

Question

Quizplus · Accepted Answer

The discounted payback period measure takes into account the time value of money, which means that future cash inflows are discounted back to present value. This helps ensure that the measure accurately reflects the profitability of an investment. The other statements are incorrect: B is incorrect because the NPV rule is generally considered the best measure of investment profitability; C is incorrect because the discounted payback measure only considers cash inflows up to the point where the initial investment is recovered, not all cash flows; D is incorrect because the discounted payback measure does not exhibit value additivity, meaning that it cannot be used to compare investments with different cash flows.

Which of the Following Statements Regarding the Discounted Payback Period