In class we discussed the payback period method and how it should be used as an...
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In class we discussed the payback period method and how it should be used as an initial screen or a supplemental method due to its weaknesses. What is the most likely case if a company ignored payback's weaknesses and used it as the company's primary method setting a 3-year payback. O The 4-year payback is too low and would cause the company to accept too many projects. O The company will accept excessive numbers of short-term projects and reject too many long-term projects (if NPV had been used). Assuming that the 4-year payback cutoff results in the company accepting the perfect number of projects under normal conditions, then the company will accept to few long-term projects when the company is weakened. O The 4-year payback is too high and would cause the company to reject too many projects. O The company will accept excessive numbers of long-term projects and reject too many short-term projects (if NPV had been used). In class we discussed the payback period method and how it should be used as an initial screen or a supplemental method due to its weaknesses. What is the most likely case if a company ignored payback's weaknesses and used it as the company's primary method setting a 3-year payback. O The 4-year payback is too low and would cause the company to accept too many projects. O The company will accept excessive numbers of short-term projects and reject too many long-term projects (if NPV had been used). Assuming that the 4-year payback cutoff results in the company accepting the perfect number of projects under normal conditions, then the company will accept to few long-term projects when the company is weakened. O The 4-year payback is too high and would cause the company to reject too many projects. O The company will accept excessive numbers of long-term projects and reject too many short-term projects (if NPV had been used).
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ANSWER A The 4year payback is too low and would cause the company to accept too many projects The 4y... View the full answer
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