Many firms use the payback method as a guideline in capital investment decisions. Reasons they do so include all of the following EXCEPT
A) it gives an implicit consideration to the timing of cash flows.
B) it recognizes cash flows which occur after the payback period.
C) it is a measure of risk exposure.
D) it is easy to calculate.

Question

Quizplus · Accepted Answer

The payback method does not consider cash flows that occur after the payback period, which is a limitation of this method.

Many Firms Use the Payback Method as a Guideline in Capital