Question

The payback method of project analysis: Multiple Choice considers the time value of money. is, generally speaking, the best method of project analysis. may ignore some project cash flows. is biased towards long-term projects over short-term projects.

Answer 1

Answer:

may ignore some project cash flows.

Explanation:

Payback calculates the amount of time it takes to recover the amount invested in a project from it cumulative cash flows

Payback period = Amount invested / cash flow

for example, if 100,000 is invested in project. the cash flows is 20,000 for the next five years, payback = 100,000 / 20,000 = 5 years

cash flows after year 5 would be ignored

Also, it can be seen that the time value of money is not considered. the cash flows have equal value regardless of when they occur

the best method is the net present value