Which capital budgeting decision metric ignores all cash inflows occurring after the initial investment payout period is reached?
AInternal Rate of Return (IRR)
BNet Present Value (NPV)
CProfitability Index (PI)
DPayback Period
Explanation
* The Payback Period measures time required for cumulative cash inflows to equal initial capital outlay.
* Standard payback ignores cash flows beyond payback cutoff and ignores the time value of money (unlike Discounted Payback).
* NPV and IRR evaluate all cash flows across project lifetime.
Exam Relevance
- Topic: Capital Budgeting
- Subtopic: Investment Evaluation Metrics

No Comments