Which of the statements below is FALSE?
A)Firms rarely use the payback period for small-dollar decisions.
B)Many companies use the payback period for small-dollar decisions because the time spent gathering the accurate cash flow may be lowered substantially if it is necessary to estimate only through the first few years.
C)Many companies use the payback period for small-dollar decisions because the future cash flows on these smaller projects may be quite difficult to accurately estimate far into the future.
D)Many companies use the payback period for small-dollar decisions because it does prevent a serious error when the future cash flow is insufficient to recover the initial cash outlay.

Question

Quizplus · Accepted Answer

The statement that firms rarely use the payback period for small-dollar decisions is false. In reality, many companies prefer using the payback period for small-dollar decisions because it simplifies the analysis and reduces the need for detailed long-term cash flow forecasts.

Which of the Statements Below Is FALSE