What are the shortcomings of the payback period criterion? Which of these shortcomings are accounted for in the dynamic payback period criterion? Which are not

Q: What happens if the payback period is within the acceptable range?

A: The payback period alludes to what extent it takes for a speculator to hit breakeven to recoup the…

Q: Discuss the following components of break-even analysis: fixed costs, variable and semi-variable…

A: Break-even point: It is the point at which the contribution margin earned on sales is equal to fixed…

Q: In a replacement analysis, why are the previous costs irrelevant?

A: Replacement Analysis is a capital budgeting method that determines whether existing assets need to…

Q: What causes the marginal rate of return to change over time?

A: Introduction: Marginal rate of return can be defined as the return attained or earned by holding a…

Q: Define the law of one price carefully, noting its fundamentals assumptions. Why are these…

A: The question is based on the concept of One price theory used in purchase power parity.

Q: Should the analyses show the sensitivity of the discounted net present value and other outcomes?

A: The question is based on the concept of a sensitivity analysis, used as a analysis tool in capital…

Q: What is the principal objection to the payback method?

A: The Payback period is one of the traditional or non-discounting techniques of Capital budgeting. It…

Q: In general terms, how would a change ininvestment opportunities affect the payoutratio under the…

A: Answer: In the residual dividend policy, the distribution is calculated after the company’s spending…

Q: Describe the strengths and weakness of payback method.

A: Definition:   Payback method: Payback method refers to the method which measures the time period…

Q: State why payback analysis should be used only as a supplemental analysis tool when an economic…

A: Payback analysis is the method for calculating payback period of an investment. Payback period is…

Q: explain why payback period is not a preferred method

A: The payback period is a period in which the total costs of an investment are recovered through cash…

Q: Give at least two reasons for choosing the net present value method and at least two reasons each…

A: Below are the reasons for choosing the net present value method: Time value of money: The net…

Q: What is the payback method? What are its main strengths and weaknesses?

A: Explain the meaning of the payback method.   The payback period is the expected time period which is…

Q: Identify and differentiate or define the types of

A: There are mainly two types of payback analysis : 1. Payback period 2. Discounted payback period

Q: What makes the risk-adjusted discount rate approach appealing?

A: Answer: The approximation of the present cash value for high risk assets is called adjusted discount…

Q: What is limitation of Payback period, Net Present Value (NPV) and Internal rate of return (IRR).…

A: i) Payback period: Payback period is the expected time period which is required to recover the cost…

Q: The benefit lost when choosing one option precludes receiving the benefits from an alternative…

A: Cost :— The two basic type of Cost incurred by Businesses are Fixed and Variable. Variable Cost…

Q: o you think a person would opt to use the Payback Period Method instead of the Net Present Value or…

A: Given information : . NPV refers to the difference between the sum of the present value of expected…

Q: List the advantages and disadvantages of the payback method.

A: Payback method is a capital budgeting method which helps to evaluate an investment based on the time…

Q: Why is the calculation to determine the target profit considered a variation of the break even…

A: Target Profit:   It is the desired amount of profit that a company expects to achieve by the end of…

Q: What is the fundamental argument behind using an opportunity cost as a discount factor in computing…

A: Opportunity cost: This term is very general and can be used on any normal day to day situation. For…

Q: Explain the payback period model and its two significant weaknesses. How does the discounted payback…

A: The payback period one of  the method of capital budgeting. It shows the required time taken to…

Q: What makes the risk-adjusted discount rate approach appealing in practical application?

A: Answer: The discount rate may be changed to offset the risk involved in a project in order to…

Q: What is the conventional-payback method?

A: Conventional Payback Method

Q: What are some criticisms of the payback method?

A: Payback Period: Payback period is the period in which the project recovers its initial cost of the…

Q: explain the disadvantages of each criteria; payback period, discounted payback, NPV, IR

A: To determine the economic feasibility of capital investment, several capital budgeting analysis…

Q: Explain why sunk costs are not considered in the analysis ofinvestment alternatives.

A: A sunk cost is also known as the retrospective cost, is a cost that cannot be recovered because it…

Q: Future costs that do not differ among the alternatives at hand are not relevant in the given…

A: Answer --The statement is TRUE.

Q: Can borrowers and lenders that perfectly agree on maximizing expected returns might still disagree…

A: The person who borrows the amount in order to conduct the business operations is known as the…

Q: Why Pay back period method is not as effective as NPV?

A: Payback method  It doesn't consider account inflation as well as the cost of capital. It ignores…

Q: When comparing the lower of cost to market the appropriate market value is determined before…

A: The inventory costing approach known as the lower-of-cost-or-market (LCM) values inventory at the…

Q: Give an example of a strength and a weakness of the accounting rate of return approach.

A: ARR stands for accounting rate of return, is a formula which computes the desired rate of return in…

Q: What are the shortcomings of the payback period?

A: Payback period: The payback period assesses the time period required to recover the initial…

Q: What are the weaknesses of the payback method?  What other options do you have?

A: Pay back period is period required to recover initial amount of investment.

Q: What is the discounted payback period?

A: Discounted payback period is period for which present value of cash flow is equivalent to initial…

Q: Why do some people say that MIRR should stand for Meaningless Internal Rate of Return?

A: Question is based on the concept of Business Finance

Q: What is meant by the term payback period?

A: The Payback Period helps to determine the extent of time required to recoup the initial cash outlay…

Q: What two arguments tend to justify classifying all costs as either fixed or variable even though…

A: Costs are the expenses which are spent by the manufacturing entity to perform its operations or…

Q: How does the residual income approach overcome this problem?

A: Definition: ROI: It is a measure of the amount of return on a particular investment with respect to…

Q: Why do the payback period analysis fail to recognize the difference between the present and future…

A: Pay-Back (PB) Period is time in which Initial outlay related to proposed investment is completely…

Q: have led to a drop in the required rate of return?

A: Required Rate of return is the minimum rate of return which an investor expects for investing in a…

Q: What are the weaknesses of the payback method?

A: Payback period is the amount of time required for firm to recover its initial investment in projects…

Q: Disadvantage of payback

A: Disadvantages of payback 1. Payback doesn't provide benefit in amount from the project it only…

Q: What are the two main drawbacks of the payback method?

A: Payback period is the method in capital budgeting which refers to the time needed to recoup the…