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An auditor's report quotes only payback periods. The limitation to point out is that it

  • A.cannot rank measures of different lives
  • B.requires a discount rate that has not been agreed
  • C.overstates the saving from every measure
  • D.cannot be computed without the capital cost

Answer: A

A board choosing between a lighting change and an insulation scheme needs to know that one runs for five years and the other for twenty-five, which payback conceals. Adding a present value column costs little and changes the ranking.

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