Which of the following is NOT a limitation of the payback period rule?
A)It does not account for changes in the discount rate.
B)It ignores cash flows after payback.
C)It is difficult to calculate.
D)It does not account for the time value of money.

Question

Quizplus · Accepted Answer

The payback period rule is relatively simple to calculate, making it one of the most widely used methods of evaluating capital budgeting projects. However, it has several limitations, including not accounting for changes in the discount rate, ignoring cash flows after payback, and not accounting for the time value of money. C is not a limitation, as the payback period is relatively easy to calculate.

Which of the Following Is NOT a Limitation of the Payback