Which of the following figures of merit might not use all possible cash flows in its calculations?
I.Payback period
II.Internal rate of return
III.Net present value (NPV)
IV.Benefit-cost ratio
A) III only
B) I & III only
C) II & III only
D) I only
E) III & IV only

Question

Quizplus · Accepted Answer

The payback period only considers the cash flows up to the point when the initial investment is recovered, so it may not use all possible cash flows in its calculations. The other figures of merit (Internal rate of return, Net present value and Benefit-cost ratio) consider all the cash flows associated with a project.

Which of the Following Figures of Merit Might Not Use