Which of the following statements regarding the discounted payback period rule is true?
A)The discounted payback rule uses the time value of money concept.
B)The discounted payback rule is better than the NPV rule.
C)The discounted payback rule considers all cash flows.
D)The discounted payback rule exhibits the value additivity property.

Question

Quizplus · Accepted Answer

The discounted payback period rule takes into account the time value of money by discounting future cash flows to their present value. However, it does not necessarily consider all cash flows and is generally considered less reliable than other capital budgeting methods like net present value (NPV). The discounted payback period rule also does not exhibit the value additivity property, meaning that the sum of the individual cash flows may not equal the total cash flow.

Which of the Following Statements Regarding the Discounted Payback Period