A weakness of the payback period is that it disregards ____.
A) projects with shorter payback periods
B) cash flows during the payback period
C) start-up costs
D) the time value of money

Question

Quizplus · Accepted Answer

The payback period does not take into account the time value of money, which means that it does not consider the potential inflation or interest rate changes that can affect the value of money over time. This weakness can lead to incorrect investment decisions, as projects with shorter payback periods may appear more attractive than projects with longer payback periods but with higher potential returns.

A Weakness of the Payback Period Is That It Disregards