Discussion
Two measures have the same payback but different lives. Simple payback
Answer: C
Correct answer: cannot distinguish between them
Payback stops counting at the moment the capital is recovered and takes no account of anything after it, so a measure lasting four years and one lasting fifteen look identical if both pay back in two. That blindness to project life is the criterion’s principal defect, and it is why net present value is needed to rank them.
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