Question：Which of the following is a disadvantage of the payback method of investment appraisal?
A. It tends to maximise financial and business risk.
B. Its use will hinder liquidity.
C. It is a fairly complex technique and not easy to understand.
D. It may lead to excessive investment in short-term projects.
The correct answer is:It may lead to excessive investment in short-term projects.
Focusing on payback will lead to choosing short-term projects.
It tends to emphasise those projects which make a quick return.
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