All of the following are criticisms of the payback period criterion except:
A) Time value of money is not accounted for.
B) Cash flows occurring after the payback are ignored.
C) It deals with accounting profits as opposed to cash flows.
D) None of the above; they are all criticisms of the payback period criteria.

Question

Quizplus · Accepted Answer

This statement is actually incorrect. The payback period criterion does consider cash flows, but it focuses on the timing of the cash inflows and outflows rather than their total value. The other criticisms are true – the payback period ignores the time value of money, and it does not take into account any cash flows that occur after the payback period.

All of the Following Are Criticisms of the Payback Period