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CIPS Exam L6M5 Topic 3 Question 7 Discussion

Actual exam question for CIPS's L6M5 exam
Question #: 7
Topic #: 3
[All L6M5 Questions]

What is the primary disadvantage of the Payback Analysis method?

Answer Options:

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Suggested Answer: C

The Payback Method ignores the time value of money (TVM) (p.1.4).

Option A is incorrect---Payback is simple.

Option B is incorrect---it accounts for investment amounts.

Option D is incorrect---Payback can compare options, but lacks long-term financial accuracy. [P.1.4]


by Keneth at Mar 07, 2025, 07:30 PM

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Stephen
13 days ago
C) It does not consider the time value of money. This is the most important disadvantage as it completely skews the analysis.
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Geoffrey
14 days ago
It's like trying to plan a road trip without a map - the Payback Analysis method is missing some crucial information.
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Dahlia
15 days ago
Ignoring the time value of money? That's like trying to buy a Ferrari with a handful of pocket change. It just doesn't add up!
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Truman
19 days ago
The Payback Analysis method is like trying to catch a slippery fish with your bare hands - it just doesn't consider the bigger picture!
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Lilli
20 days ago
I think that's a major drawback, especially when comparing projects with different cash flows over time.
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Rolland
23 days ago
That's true, the Payback Analysis method only focuses on how long it takes to recoup the initial investment.
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Johnathon
1 months ago
C) It does not consider the time value of money.
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