Which of the following statements regarding discounted payback (DPB) is/are not true?
A) It ignores any cash flows that accrue after the project reaches its respective payback benchmark.
B) Is a capital budgeting method that generates decision rules and associated metrics that choose projects based on how quickly they return their initial investment plus interest.
C) both a and b are not true.
D) none of the above.

Question

Quizplus · Accepted Answer

Both statements A and B are not true regarding discounted payback (DPB). Statement A is true for the traditional payback period method, not DPB, because DPB does consider the time value of money and discounts the cash flows accordingly, but it still ignores cash flows after the payback period. Statement B inaccurately describes DPB; it does not add interest to the initial investment but rather discounts future cash flows to present value to determine how quickly the initial investment is recovered.

Which of the Following Statements Regarding Discounted Payback (DPB) Is/are