The payback period has the following weaknesses as decision criterion for capital projects: Uses accounting income instead of cash flows Ignores cash flows beyond the payback period Does not take into account the time value of money yes yes yes no yes yes yes yes no yes no no
The payback period has the following weaknesses as decision criterion for capital projects: Uses accounting income instead of cash flows Ignores cash flows beyond the payback period Does not take into account the time value of money yes yes yes no yes yes yes yes no yes no no
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter19: Capital Investment
Section: Chapter Questions
Problem 20E
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The payback period has the following weaknesses as decision criterion for capital projects:
Uses accounting income instead of |
Ignores cash flows beyond the payback period |
Does not take into account the time value of money |
yes | yes | yes |
no | yes | yes |
yes | yes | no |
yes | no | no |
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