Asked by Ricardo Ortiz on Jul 29, 2024
Verified
Which statement below is true about the evaluation of an investment having uneven cash flows using the payback method?
A) It will produce essentially the same results as those obtained through the use of discounted cash flow techniques.
B) It cannot be done.
C) It requires the use of a sophisticated calculator or computer software.
D) It can be done only by matching cash inflows and investment outflows on a year-by-year basis.
Payback Method
A capital budgeting method that calculates the time needed to recoup the initial investment in a project, based on the project's expected cash flows.
Discounted Cash Flow
A financial analysis method that estimates the value of an investment based on its future cash flows, adjusted for time and risk.
Cash Inflows
Money received by a business from its operations, investments, or financing activities.
- Calculate and interpret the time frame for investment recovery.
- Develop the ability to assess investment projects with uneven cash flows.
Verified Answer
Learning Objectives
- Calculate and interpret the time frame for investment recovery.
- Develop the ability to assess investment projects with uneven cash flows.
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