Asked by Miquan Patton-Martin on Jul 12, 2024
Verified
A shorter payback period reduces the company's ability to respond to unanticipated changes and increases the risk of having to keep an unprofitable investment.
Payback Period
The amount of time it takes for an investment to generate an amount of income or cash equal to the cost of the investment.
Unprofitable Investment
An investment that generates a financial loss or does not achieve the expected financial return.
- Comprehend the hazards involved in capital budgeting decisions and their effect on project selection.
Verified Answer
JM
janae mccallJul 14, 2024
Final Answer :
False
Explanation :
A shorter payback period actually increases the company's ability to respond to unanticipated changes as it allows for quicker recovery of invested capital. It also reduces the risk of having to keep an unprofitable investment for a longer period of time.
Learning Objectives
- Comprehend the hazards involved in capital budgeting decisions and their effect on project selection.
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