COST ACCOUNTING
CAPITAL BUDGETING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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The following are the disadvantages of the payback period, except
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Not paying attention to the time value of money
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Ignoring cash flows after the answer payback period
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Ignore the flowers
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Easy to calculate
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Explanation:
Detailed explanation-1: -Answer: D. It ignores the expected profitability of a project. A disadvantage of the cash payback technique is that it ignores the expected profitability of a project.
Detailed explanation-2: -Ignores the time value of money: The most serious disadvantage of the payback method is that it does not consider the time value of money.
Detailed explanation-3: -Using the Payback Method It is easy to calculate and is often referred to as the “back of the envelope” calculation. Also, it is a simple measure of risk, as it shows how quickly money can be returned from an investment.
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