PRC-2 · Chapter 5 · Question 33 of 50
Which project evaluation method is purely focusing on the time it takes for a project to recover its initial cash investment, without necessarily considering the time value of money?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) Simple Payback Period
Explanation
The simple payback period merely counts the years until the initial outlay is recovered. Its main drawback is that it ignores cash flows after the payback date and fails to discount future money.
More Financial Mathematics MCQs
- Q35What is a 'Profitability Index' (PI) utilized for in project selection?
- Q36What does the first derivative (dy/dx) of a function represent graphically?
- Q37According to the 'Power Rule' of differentiation, if y = x^n, then dy/dx is:
- Q38What is the derivative of any constant value (e.g., y = 500)?
- Q39In business applications, 'Marginal Cost' (MC) is mathematically defined as: