Which of the following statements is CORRECT? (Points : 0.41) The regular paybac

Question

Which of the following statements is CORRECT? (Points : 0.41) The regular payback method recognizes all cash flows over a project’s life. The discounted payback method recognizes all cash flows over a project’s life, and it also adjusts these cash flows to account for the time value of money. The regular payback method was, years ago, widely used, but virtually no companies even calculate the payback today. The regular payback is useful as an indicator of a project’s liquidity because it gives managers an idea of how long it will take to recover the funds invested in a project. The regular payback does not consider cash flows beyond the payback year, but the discounted payback overcomes this defect.

Explanation / Answer

The correct statement is :

The regular payback is useful as an indicator of a project’s liquidity because it gives managers an idea of how long it will take to recover the funds invested in a project.

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