Asked by Ashley Lowell on Jul 14, 2024
Verified
Neither the payback period nor the accounting rate of return methods of evaluating investments considers the time value of money.
Payback Period
The length of time it takes to recover the initial cost of an investment.
Accounting Rate of Return
A financial metric used to assess the profitability and potential return of an investment or project, based on the average annual profit compared to the initial investment cost.
Time Value
The concept that money available today is worth more than the same amount in the future due to its earning potential.
- Comprehend the importance and application of the time value of money in investment decisions.
Verified Answer
JN
James NdubuezeJul 20, 2024
Final Answer :
True
Explanation :
Both the payback period and the accounting rate of return methods only focus on the expected cash inflows and outflows, without taking into account the impact of inflation or the opportunity cost of tying up money in an investment. Therefore, they do not consider the time value of money.
Learning Objectives
- Comprehend the importance and application of the time value of money in investment decisions.