Final answer:
The payback period rule has disadvantages such as an arbitrary cutoff point, bias towards liquidity, and lack of adjustment for uncertainty.
Explanation:
Disadvantages of the payback period rule:
- Arbitrary cutoff point: The payback period rule requires selecting an arbitrary cutoff point, which may not consider the time value of money.
- Biased toward liquidity: It favors projects that return cash quickly, potentially disregarding long-term profitability.
- No adjustment for uncertainty: The payback period rule does not consider the uncertainty of future cash flows, leading to a limited evaluation.
Learn more about Payback period rule here:
https://brainly.com/question/38804590
