Which of the following statements is CORRECT?

Question

Quizplus · Accepted Answer

The regular payback method does not consider cash flows beyond the payback period, which is a major limitation of this method. The discounted payback method is designed to overcome this problem by considering the time value of money and the cash flows beyond the payback period. However, choice C is incorrect because it suggests that the discounted payback method overcomes the problem of ignoring cash flows beyond the payback period, which is not accurate. The correct statement is that the discounted payback method considers cash flows beyond the payback period by discounting them to their present value before calculating the payback period. Choice B is incorrect because a positive payback does not necessarily indicate a positive NPV, and choice D is incorrect because the discounted payback method does consider the time value of money by discounting the future cash flows. Finally, choice E is incorrect because a shorter payback period is generally considered to be more desirable, not less desirable.

Which of the Following Statements Is CORRECT