In considering the payback period:
A)The maximum period allowed by a firm is a specific time period based on objective criteria.
B)It considers the time value of money in determining the maximum allowable time period.
C)It gives some indication of a project's desirability from a liquidity viewpoint.
D)It is based on cash flows both during and after the payback period.

Question

Quizplus · Accepted Answer

The payback period provides some indication of a project's desirability from a liquidity viewpoint, as it measures the amount of time it takes to recover the initial investment. However, it does not consider the time value of money or have a specific maximum time period set by a firm. The payback period only looks at cash flows during the payback period and does not include cash flows after that period. Therefore, the best choice is C.

In Considering the Payback Period