New Enroll in RBI Grade B New Batch - Starts on May 21

    Question

    The payback technique is especially useful during the

    time ________.
    A When there is no inflation. Correct Answer Incorrect Answer
    B When the value of money is turbulent. Correct Answer Incorrect Answer
    C When the economy is growing at a steady rate coupled with minimal inflation. Correct Answer Incorrect Answer
    D Both, when the value of money is turbulent and when there is no inflation. Correct Answer Incorrect Answer

    Solution

    The payback technique is especially useful during the time when the value of money is turbulent. The payback technique is a simple capital budgeting method used to analyze the time it takes to recover an initial investment. It does not consider the time value of money or inflation, making it more appropriate for situations where the value of money is unstable or uncertain. In times of turbulent value of money, other more sophisticated capital budgeting techniques like Net Present Value (NPV) or Internal Rate of Return (IRR) may be less reliable due to the uncertainty in cash flows and interest rates. The payback method, on the other hand, focuses on the time it takes to recoup the initial investment without taking into account the impact of inflation or discounting future cash flows.

    Practice Next