Which two methods of project analysis are the most biased towards short-term projects?
A) Net present value and internal rate of return
B) Internal rate of return and profitability index
C) Payback and discounted payback
D) Net present value and discounted payback
E) Discounted payback and profitability index

Question

Which two methods of project analysis are the most biased towards short-term projects?
A) Net present value and internal rate of return
B) Internal rate of return and profitability index 
C) Payback and discounted payback
D) Net present value and discounted payback 
E) Discounted payback and profitability index

Quizplus · Accepted Answer

Payback and discounted payback are both biased towards short-term projects as they focus on the amount of time it takes to recover the initial cash outlay. These methods do not take into account the time value of money and future cash flows beyond the payback period. The other methods listed, especially net present value, consider the timing and size of all cash flows, making them more suitable for long-term projects.

Which Two Methods of Project Analysis Are the Most Biased