Asked by Emily Calabrese on Apr 27, 2024
Verified
The payback method of evaluating an investment fails to consider how long the investment will generate cash inflows beyond the payback period.
Payback Method
An investment appraisal technique that calculates the amount of time required for an investment to generate cash flows sufficient to recover its initial cost.
Cash Inflows
Money or equivalent value received by a business, often from operations, investments, or financing activities.
- Gain insight into the net present value methodology and its critical role in planning capital expenditures.
Verified Answer
BS
Breanna SeawellApr 30, 2024
Final Answer :
True
Explanation :
The payback method only looks at the time it takes to recoup the initial investment, and ignores any cash flows that occur after that payback period.
Learning Objectives
- Gain insight into the net present value methodology and its critical role in planning capital expenditures.
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