question archive Which of the following statements about the evaluation of an investment having uneven cash flows using the payback method is correct? It CANNOT be done
Which of the following statements about the evaluation of an investment having uneven cash flows using the payback method is correct? It CANNOT be done
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Which of the following statements about the evaluation of an investment having uneven cash flows using the payback method is correct?
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It CANNOT be done.
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It can be done only by matching cash inflows and investment outflows on a year-by-year basis.
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It will produce essentially the same results as those obtained through the use of discounted cash flow techniques.
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It requires the use of a sophisticated calculator or computer software.
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Answer:
| It can be done only by matching cash inflows and investment outflows on a year-by-year basis. |
| Payback period is the time period at which the cost of investment is recovered. |
| While calculating payback period for an investment having uneven cash flows, cumulative cash flows should be calculated and payback period would be when cumulative cash flows equal zero. |
| Option B is correct |
