Terms used in engineering economics have standard definitions and interpretations. Which one of the following statements is $INCORRECT$?

1. The profitability measure 'return on investment' does not consider the time value of money
2. A cost index is an index value for a given time showing the cost at that time relative to a certain base time
3. The 'six-tenths factor rule' is Used to estimate the cost of an equipment from the cost of a similar equipment with a different capacity
4. Payback period is calculated based on the payback time for the sum of the fixed and the working capital investment