Firms that make investment decisions based upon the payback rule may be biased toward rejecting projects:
A)with short lives.
B)with long lives.
C)with early cash inflows.
D)that have negative NPVs.

Question

Quizplus · Accepted Answer

The payback rule, which focuses on how quickly an investment can be recouped, tends to bias firms against projects with long lives because it does not consider the benefits that accrue after the payback period.

Firms That Make Investment Decisions Based Upon the Payback Rule