Asked by Keely Mizenburg on Jul 20, 2024
Verified
When comparing the payback and discounted payback from a financial point of view, the discounted payback method is preferred over the payback method.
Discounted Payback
The period of time it takes for the sum of the discounted cash flows to pay back the initial investment.
Payback
The amount of time it takes for an investment to generate enough returns to recover the original investment cost.
- Evaluate and differentiate the payback and discounted payback approaches, focusing on their inclinations and fiscal outlooks.
Verified Answer
RW
Rachel Woon Pin YueJul 26, 2024
Final Answer :
True
Explanation :
The discounted payback method is preferred because it takes into account the time value of money, providing a more accurate reflection of the project's profitability by discounting future cash flows to their present value.
Learning Objectives
- Evaluate and differentiate the payback and discounted payback approaches, focusing on their inclinations and fiscal outlooks.
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