CFA Practice Question

There are 233 practice questions for this study session.

CFA Practice Question

An advantage of the payback period rule is that it ______

I. adjusts for uncertainty of early cash flows.
II. discounts cash flows.
III. is simple to use.
Correct Answer: III only

User Contributed Comments 2

User Comment
loisliu88 why is l not right? it tells us how long the initial investment will be tied up in the project, therefore indicates project's risk and a hint of liquidity.
Bududeen uncertainty implies risk... the nominal cash flows when not discounted by the cost of capital have not been adjusted for risk and uncertainty..hence, I is not correct
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