CFA CFA Level 1 Question of the Week – Corporate Finance

Question of the Week – Corporate Finance

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    • Avatar of AdaptPrepAdaptPrep
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        The payback period approach is inappropriate for all but which of the following reasons?

        • Time value of money is ignored.
        • Cash flows after the payback period are ignored.
        • The payback approach will always endorse the wrong project.
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        Ah crap, reading critically is key!! 

      • Avatar of hairyfairyhairyfairy
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          I like questions like these. Question wording is equally tricky no matter what the levels so always good to have a bit of practice on this.

        • Avatar of AdaptPrepAdaptPrep
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            The payback period often does support the best
            project. The metric is flawed for the other two reasons (and more), so it doesn’t always give the best results.

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            I’m with you on that one mate. Had to read it 3 times before I went with an answer.

          • Avatar of shannondailyshannondaily
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              Boo! I got it wrong. :neutral_face: 

            • Avatar of policedogpolicedog
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                inappropriate for all but which of the following reasons” – was well confused by that one!

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