Question

All of the following are weaknesses of the payback period: (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. Any boxes left with a question mark will be automatically graded as incorrect.) check all that apply it uses cash flows, not income,unanswered it is easy to use.unanswered it ignores all cash flows after the payback period.unanswered it ignores the time value of money.

Answer 1

it ignores all cash flows after the payback period.

it ignores the time value of money.

Step-by-step explanation:

Payback calculates the amount of time it takes to recover the amount invested in a project from it cumulative cash flows

example of the payback method.

10,000 is invested in a project. The cash flows in year 1 is 10,000. The cash flow in year 2 and 3 is 5000.

The payback period is 1 year because 10,000 is recovered in the first year.

The cash flows in year 2 and 3 are ignored in this calculation.

The payback method using cash flows and not income is an advantage.

The payback method ignores the time value of money but the discounted cash flow method doesn't