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ladessa [460]
3 years ago
9

A disadvantage of using the payback period to compare investment alternatives is that:

Business
1 answer:
Murljashka [212]3 years ago
3 0

Answer: Option a

                             

Explanation: Payback period in capital budgeting comes from a time needed to recover or exceed the break-even point of the funds spent on a project. Moreover, the payback period does not take into account the time value of money.

It is based on the number of years it would take for the funds spent to be recovered. Thus, payback period only evaluates a project on the basis of time period it takes to recover back the investment this results in ignorance of cash flows, which might be huge in amount, that results after the pay back period.

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