Demerits of the Payback Period Method
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Questions and Answers

Which of the following is a demerit of the Payback period method?

  • It considers the time value of money.
  • It neglects cash flows occurring after the payback period. (correct)
  • It calculates the post payback period.
  • It considers the risk associated with the project.

    • What does the Payback period method neglect?

  • The time value of money.
  • Cash flows occurring after the payback period. (correct)
  • The risk associated with the project.
  • The post payback period.

    • What is the post payback period?

  • The difference between the economic life and the payback period.
  • The total earning from the project plus the scrap value.
  • The duration in excess of payback period till the economic life of a project. (correct)
  • The amount of profit earned after the recovery of initial investment.

    • What is post payback profitability?

    <p>The amount of profit earned after the recovery of initial investment.</p> Signup and view all the answers

    What does the Payback period method not consider?

    <p>The risk associated with the project.</p> Signup and view all the answers

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