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

Question

Quizplus · Accepted Answer

The payback rule focuses on how quickly an investment can recoup its initial cost, often leading to a bias against projects with long lives, as they may take longer to pay back despite potentially being profitable in the long run.

Firms That Make Investment Decisions Based on the Payback Rule