alleryStart learning →The payback method considers the time frame to recoup an investment based on expected:
AFuture share prices
BAnnual cash flows
CQuarterly dividends
DHistoric book values
Answer & Solution
Correct answer: B. Annual cash flows
1. The payback calculation uses one specific input.
2. The payback method measures how long an investment takes to repay itself.
3. It considers the time frame to recoup an investment.
4. That is based on expected annual cash flows.
_Source: OpenStax Principles of Accounting, Volume 2: Managerial Accounting (CC BY-NC-SA 4.0), Ch 11 'Capital Budgeting Decisions'_
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Related questions
Complete the capital budgeting rulesMatch each capital budgeting methodStack the capital budgeting termsSort the capital budgeting methodsPull the rope to the right method familyChoosing a project on payback alone risks favouring one that repays quickly but earns:Of the four named methods, how many account for the time value of money?The payback method's focus on recouping an investment makes it primarily a measure of: