10) Which of the following statements is FALSE? A) The payback rule is useful in

Question

10) Which of the following statements is FALSE?

A) The payback rule is useful in cases where the cost of making an incorrect decision might not be large enough to justify the time required for calculating the net present value (NPV).

B) The payback rule is reliable because it considers the time value of money and depends on the cost of capital.

C) For most investment opportunities expenses occur initially and cash is received later.

D) Fifty percent of firms surveyed reported using the payback rule for making decisions.

Explanation / Answer

Answet is B.

The payback rule doesnot consider time value of money nor the cost of capital.

It only considers time taken to recover initial investment.

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