Which method has more severe bias against long lived projets

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1. Holding the cutoff period fixed, which method has a more severe bias against long-lived projects, payback or discounted payback?

2. For a firm that uses the NPV rule to make investment decisions, what consequences result if the firm misestimates shareholders' required returns and consistently applies a discount rate that is "too high"?

Reference no: EM131328799

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Which method has more severe bias against long lived projets : Holding the cutoff period fixed, which method has a more severe bias against long-lived projects, payback or discounted payback?

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Cash flow projection more than a few years out are not worth : Using payback analysis, which ignores longterm cash flows, is more reasonable than making wild guesses as one has to do in the NPV approach." Respond to this comment.

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Smart analysts can massage the numbers in npv analysis : It is better to use a simpler approach like payback or accounting rate of return that gives analysts fewer degrees of freedom to manipulate the numbers." Respond to this comment.

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