Some firms use the payback period as a decision criterion or as a supplement to sophisticated decision techniques, because
A) it explicitly considers the time value of money.
B) it can take the place of the net present value approach.
C) the determination of payback is an objectively determined criteria.
D) it can be viewed as a measure of risk exposure.

Question

Quizplus · Accepted Answer

The payback period is often used as a measure of risk exposure because it indicates how quickly an investment can recover its initial cost, thus providing insight into the risk associated with the investment.

Some Firms Use the Payback Period as a Decision Criterion