Asked by Dhvani Chodavadia on Apr 29, 2024
Verified
A major limitation of the payback method is that it cannot be used in situations where future budgeted cash flows are uneven.
Payback Method
A financial analysis tool used to determine the time required to recover the cost of an investment.
Future Cash Flows
Estimated future financial transactions that involve the inflow or outflow of money over a period of time.
- Attain knowledge of the primary principles of capital budgeting and the diverse procedures used for examining investment projects.
Verified Answer
KA
Kelli AskinsMay 06, 2024
Final Answer :
False
Explanation :
The statement is false. A major limitation of the payback method is that it ignores the time value of money and does not consider cash flows beyond the payback period.
Learning Objectives
- Attain knowledge of the primary principles of capital budgeting and the diverse procedures used for examining investment projects.
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