EBK ACCOUNTING PRINCIPLES
13th Edition
ISBN: 9781119411017
Author: Weygandt
Publisher: WILEY
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Chapter 27, Problem 3Q
To determine
Introduction: The payback period is the method used by the investors to determine the time period to be taken in the recovery of cost. It represents the number of years to be taken in recovering the investment amount by evaluating future possible
If the claim made by person T is correct. Also, state the formula for determining the payback period.
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The discounted payback method considers the time value of money as well as the cash flows after the payback.Group of answer choices
A.false
B. true
What are the similarities between the time value of money formulas and the NPV analysis?
Which of the following is true of the cash payback period?
a.the longer the payback, the longer the estimated life of the asset
b.the longer the payback, the sooner the cash spent on the investment is recovered
c.the shorter the payback, the less likely the possibility of obsolescence
d.All of these answers are correct.
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Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- An advantage of the internal rate of return method is that a.it considers the time value of money. b.it can rank proposals of equal lives. c.it considers the cash flows of the investment. d.All of these choices are correct.arrow_forwardWhen using the NPV method for a particular investment decision, if the present value of all cash Inflows Is greater than the present value of all cash outflows, then _______ . A. the discount rate used was too high B. the investment provides an actual rate of return greater than the discount rate C. the investment provides an actual rate of return equal to the discount rate D. the discount rate is too lowarrow_forward“The greater the discount rate, the greater the present value of a future cash flow.” True or false? Explain your answer.arrow_forward
- When using the NPV method for a particular investsment decision, if the present value of all cash inflows is greater than the present value of all cash outflows, then ________. Group of answer choices A. the discount rate used was too high B. the investment provides an actual rate of return greater than the discount rate C. the investment provides an actual rate of return equal to the discount rate D. the discount rate is too lowarrow_forwardThe payback period method has been criticized for not taking the time value of money intoaccount. Could this limitation be overcome? If so, would this method then be preferable to theNPV method?arrow_forwardWhich of the following is an advantage of the cash payback method? a. takes into consideration the time value of money b. easy to use c. includes the cash flow over the entire life of the proposal d. emphasizes accounting incomearrow_forward
- Why do the payback period analysis fail to recognize the difference between the present and future value of money?arrow_forwardHow would a reduction in the cash conversion cycle increase profitability?arrow_forwardThe internal rate of return is: the discount rate that equates the present value of the cash inflows with the present value of the cash outflows. the discount rate that makes NPV negative and the PI greater than one. the rate of return that makes the NPV positive. the discount rate that makes the NPV positive.arrow_forward
- You plan to analyze the value of a potential investment by calculating the sum of the present values of its expected cash flows. If the discount rate decreases the it would lower the calculated value of the investment. Group of answer choices True Falsearrow_forwardWhich of the following is NOT a limitation of the payback rule? O It does not consider cash flows occurring after the payback period. O Lacks a decision criterion that is economically based. O It does not consider the time value of money. O It is difficult to calculate.arrow_forwardDescribe the Replacement Analysis Using the Cash-Flow approach?arrow_forward
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