The payback method is at best a crude measure of the risk of a project because it fails to consider the ____ of a project's returns.
A) liquidity
B) variability
C) timing
D) magnitude

Question

Quizplus · Accepted Answer

The payback method only considers the time it takes to recoup the initial investment and does not take into account the variability or risk associated with the returns. This can lead to overly optimistic projections and a failure to account for potential downside risks. Therefore, option B is the correct answer because it refers to the variability of returns.

The Payback Method Is at Best a Crude Measure of the Risk