Question
The discounted payback period has which of these weaknesses?
Multiple select question.
Arbitrary cutoff date
Lack of a decision rule
Exclusion of some cash flows
Loss of simplicity as compared to the payback method
Multiple select question.
Arbitrary cutoff date
Lack of a decision rule
Exclusion of some cash flows
Loss of simplicity as compared to the payback method
Answers
GPT-4o mini
The discounted payback period has the following weaknesses:
1. **Arbitrary cutoff date** - The choice of the cutoff date can be somewhat arbitrary, which can affect decision-making.
2. **Exclusion of some cash flows** - The discounted payback period only considers cash flows up to the point of payback and ignores any cash flows that occur after the payback period.
While the other options ("Lack of a decision rule" and "Loss of simplicity as compared to the payback method") may apply to certain contexts, they are not inherently recognized weaknesses specific to the discounted payback period method itself.
In summary, the weaknesses of the discounted payback period are **arbitrary cutoff date** and **exclusion of some cash flows**.
1. **Arbitrary cutoff date** - The choice of the cutoff date can be somewhat arbitrary, which can affect decision-making.
2. **Exclusion of some cash flows** - The discounted payback period only considers cash flows up to the point of payback and ignores any cash flows that occur after the payback period.
While the other options ("Lack of a decision rule" and "Loss of simplicity as compared to the payback method") may apply to certain contexts, they are not inherently recognized weaknesses specific to the discounted payback period method itself.
In summary, the weaknesses of the discounted payback period are **arbitrary cutoff date** and **exclusion of some cash flows**.