Question

What is a limitation of the Pay-back Method?

a.

It considers the time value of money in pay-back calculation

b.

It provides a measure of recovery period, not profitability position

c.

It indicates the liquidity position of the firm as a whole

d.

It includes cash inflows beyond the pay-back period

Answer: (b).It provides a measure of recovery period, not profitability position Explanation:A limitation of the Pay-back Method is that it provides a measure of the recovery period but not the profitability position of the project.

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Q. What is a limitation of the Pay-back Method?

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