The payback method is most appropriate for projects whose cash flows do not extend far into...
The payback method is most appropriate for projects whose cash flows do not extend far into the future.
true or False
Homework Answers
Solution: Given statement in the question is True
Reason:
1) Payback period is the length of time required for the cumulative total net cash flows from investment to equal the total initial cash outflow.
2) Length of payback period serve as an estimate of project's risk. Longer the payback period, riskier the project as long term predictions are less reliable. Hence payback method is most appropriate for projects whose cash flows do not extend far into the future.
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