Payback is frequently used to analyze independent projects because:
A)it considers the time value of money.
B)all relevant cash flows are included in the analysis.
C)it is easy and quick to calculate.
D)it is the most desirable of all the available analytical methods from a financial perspective.
E)it produces better decisions than those made using either NPV or IRR.

Question

Quizplus · Accepted Answer

Payback is easy and quick to calculate, which is why it is frequently used to analyze independent projects. However, it does not consider the time value of money and may not include all relevant cash flows. NPV and IRR are more comprehensive methods of analysis, but they are also more complex and time-consuming to calculate. Therefore, the best choice depends on the specific needs and circumstances of the decision-maker.

Payback Is Frequently Used to Analyze Independent Projects Because