State why payback analysis should be used only as a supplemental analysis tool when an economic study is performed.
What will be an ideal response?
Payback analysis should be used only as a supplemental analysis tool because it only determines the time necessary to recover the initial investment at a stated return (i ? 0%). Therefore, payback does not recognize cash flows beyond the payback period. An alternative with increasing cash flows that makes the rate of return increase may not be selected when another alternative (possibly with a lower rate of return) has a shorter payback period.
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Schematics in industry are often small.
Answer the following statement true (T) or false (F)
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