The payback method for the measurement of return on investment___________________?
Correct answer: B. Does not measure the discounted rate of return
- A. Gives a correct picture of profitability
- B. Does not measure the discounted rate of return
- C. Underemphasises liquidity
- D. Takes into account the cash inflows after the recovery of investments
Explanation
The simple payback period measures how quickly the initial investment is recovered, but it ignores the time value of money and does not determine a discounted rate of return. It also ignores cash flows received after payback.
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