Which of the following statements is true of the payback period method of capital budgeting?

Question

Quizplus · Accepted Answer

The payback period method is indeed the simplest and oldest formal model to evaluate capital budgeting projects. It measures the time it takes for cash inflows to equal the initial investment, but it does not directly account for the time value of money nor consider the discounted value of cash flows beyond the payback period. It does not necessarily result in maximizing the value of the firm and does not incorporate risk into the discount rate used to solve the payback period.

Which of the Following Statements Is True of the Payback