Discussion
Three of the following are true of the simple payback period. The exception is
Answer: D
Correct answer: it accounts for the time value of money
The simple payback treats a pound received in year five as equal to one received today, which is exactly the defect the discounted form was devised to remedy. The other three are all true, including the second - measuring exposure is the legitimate use of the method, provided it is not asked to measure profitability as well.
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