The owner of a small construction business has asked you to evaluate the purchase of a new front end loader.You have determined that this investment has a large,positive,NPV,but are afraid that your client will not understand the method.A good alternative method in this circumstance might be
A)the payback method.
B)the profitability index.
C)the internal rate of return.
D)the modified internal rate of return.

Question

Quizplus · Accepted Answer

The payback method is a simpler method of evaluating the profitability of an investment, as it measures the time it takes for the initial investment to be recovered. This may be a better option for the owner of a small construction business who may not have a strong background in finance and accounting. However, it should be noted that the payback method does not take into account the time value of money or the full net present value of the investment.

The Owner of a Small Construction Business Has Asked You