Which of the following statements is correct?
A)A weakness of both payback and discounted payback is that neither accounts for cash flows received after the payback.
B)Discounted payback uses a more aggressive reinvestment rate assumption than payback.
C)Neither payback nor discounted payback uses time value of money concepts.
D)None of these statements are correct.

Question

Quizplus · Accepted Answer

Both payback and discounted payback do not account for cash flows received after the payback period, which is a weakness of these methods. Option B is incorrect because discounted payback uses a conservative, rather than aggressive, reinvestment rate assumption. Option C is incorrect because both payback and discounted payback employ time value of money concepts, with the latter method adjusting for the present value of future cash flows.

Which of the Following Statements Is Correct