A disadvantage of using the payback period to compare investment alternatives is that: Cannot be used if a company records a depreciation 0 Cannot be used to compare investments with different initial investments. ° Understands the time value of money. O Ignores cash flows beyond the payback period. O Cannot be used when cash flows are not uniform.
Answer 1
The correct option is “Ignore cash flows beyond
period of time’.
Payback period=Last period with negative accumulated cash
flows+(Absolute value of accumulated cash flows during this period/Cash
flow after this period).
Therefore, cash flows beyond reimbursement are not considered.
regardless of the size of those cash flows.
does not include the notion of the time value of money,