Question

What is one of the limitations of the Pay-back Method that the discounted payback period aims to overcome?

a.

Failure to consider the time value of money

b.

Discrimination against projects with substantial cash inflows in later years

c.

Ignoring cash inflows beyond the pay-back period

d.

Lack of indication of the liquidity position of the firm

Answer: (a).Failure to consider the time value of money Explanation:One of the limitations of the Pay-back Method is the failure to consider the time value of money. The discounted payback period aims to overcome this limitation.

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Q. What is one of the limitations of the Pay-back Method that the discounted payback period aims to overcome?

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