Which of the following decision rule ignores the time value of money? a

Finance Dec 16, 2020

Which of the following decision rule ignores the time value of money?

a.The net present value rule

b.The payback rule

c.The internal rate of return rule

d.The profitability index rule

Expert Solution

The correct option is B "The Payback rule". The payback period disregards the time value of money. It is determined by counting the number of years it takes to recover the funds invested. While other decision rules (Net Present Value, Internal Rate of Return or Profitability Index) considers the time value of money.

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