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In Kaplan kit, there is a question relating to true or false in regards to the payback period
* It is a risk-focussed approach in decision-making- TRUE
Is the risk here considered to be full payment being optimised by the profits or something else?
As I do explain in my free lectures, whatever appraisal method we use then we are dealing with estimates of future flows, and the further into the future we estimate then the more uncertain the flows become.
With playback period, the shorter the payback period the better because estimate for earlier years are going to be less uncertain, and so if the payback period is short the more sure we are that the project will actually pay for itself.
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